BANK OF ENGLAND HAS NO TECH SKILLS TO ISSUE CBDC YET: DEPUTY GOVERNOR

The digital revolution is knocking on the door of central banking, and while many countries are racing to develop their own Central Bank Digital Currencies (CBDCs), the United Kingdom faces a significant hurdle. As part of the Bank of England s central bank digital currency (CBDC) design phase, it explored an offline CBDC for its digital pound. At this stage it was only interested in technology issues, so it tested solutions provided by Thales, Secretarium, IDEMIA Secure Transactions, Quali-Sign and Consult Hyperion. It concluded the solutions wereAccording to Jon Cunliffe, Deputy Governor of the Bank of England (BoE), the UK isn't quite ready to jump on the CBDC bandwagon. The Bank of England received a large number of responses to the 2025 Discussion Paper and is grateful for the engagement and input of all those who shared their views. While the Bank of England has not yet made a decision around CBDC, the feedback we received has showed strong support for the Bank to continue exploring CBDC.The primary reason? According to a deputy governor, the United Kingdom is not ready to issue a central bank digital currency (CBDC) just yet, as the Bank of England (BoE) doesn t have enough expertise. There isA critical lack of in-house technological expertise.While the BoE recognizes the potential benefits of a digital pound – from streamlined payments to enhanced financial inclusion – it currently lacks the specific technical skills required to design, develop, and securely manage such a complex system. Cointelegraph By Helen Partz The United Kingdom is not ready to issue a central bank digital currency (CBDC) just yet as the Bank of England (BoE) doesn t have enough expertise at the moment, according to a deputy governor. There is more than a 50% chance that the central bank of the United Kingdom would issue [ ]This revelation has sparked debate about the UK's digital readiness and its future role in the evolving landscape of global finance. The BoE does not have enough technical skills to create a CBDC. The Deputy Governor of the BoE recently said that the UK cannot yet launch a CBDC. Jon Cunliffe explained that it takes specific technical skills to develop a central bank digital currency. But, according to him, the Bank of England does not yet have all the necessary expertise.Are we falling behind? Related: Bank of England has no tech skills to issue CBDC yet: Deputy governor. Tokenized bank deposits are a much simpler proposition than non-bank stablecoins, and may allow banks depositsWhat steps are being taken to bridge this skills gap? There is more than a 50% chance that the central bank of the United Kingdom would issue a CBDC, but the regulator doesn t have the technical skills to issue a digital currency yet, BoE deputy governor Jon Cunliffe declared at the treasury select committee hearing on Feb. 28.And what does this mean for the future of money in the UK?Let’s delve into the details and explore the challenges and opportunities that lie ahead in the UK's CBDC journey.

The Bank of England's CBDC Ambitions and Technical Hurdles

The Bank of England has been actively exploring the possibility of introducing a CBDC, often referred to as the ""digital pound."" The motivations are clear: to modernize the financial system, enhance payment efficiency, and potentially foster innovation.However, the path to a digital pound isn't paved with ease.Deputy Governor Jon Cunliffe's recent statements to the Treasury Select Committee hearing have highlighted a significant stumbling block: the BoE's current lack of sufficient technical skills.

Cunliffe emphasized that developing a CBDC requires specialized expertise in areas such as cryptography, distributed ledger technology (DLT), cybersecurity, and large-scale data management.These skills are not readily available within the bank's existing workforce, necessitating a strategic approach to acquire or cultivate the necessary talent.

Why is Tech Expertise So Crucial for a CBDC?

The technical challenges inherent in building a robust and secure CBDC are immense.Here's why:

• Security: A CBDC must be impervious to cyberattacks and fraud.Robust security measures, including advanced encryption and multi-factor authentication, are essential to protect user data and prevent the manipulation of the digital currency.
• Scalability: The system needs to handle a massive volume of transactions quickly and efficiently.This requires a scalable architecture that can adapt to increasing demand without compromising performance.
• Interoperability: The CBDC must seamlessly integrate with existing payment systems and potentially with other digital currencies.This requires standardized protocols and a focus on interoperability.
• Privacy: Balancing the need for transparency with the protection of user privacy is a delicate act.The CBDC system must incorporate privacy-enhancing technologies to prevent the tracking of individual transactions.
• Resilience: The system needs to be highly resilient to ensure continuous operation, even in the face of technical glitches or infrastructure failures.

These challenges require a deep understanding of complex technologies and a skilled workforce capable of designing, implementing, and maintaining a highly sophisticated system.

Exploring Offline CBDC Functionality: A Glimpse into the Design Phase

Despite the acknowledged skills gap, the Bank of England has been actively engaged in exploring various design options for a potential CBDC.One particularly interesting area of investigation has been the feasibility of an offline CBDC.

The BoE explored an offline CBDC for its digital pound.At this stage it was only interested in technology issues, so it tested solutions provided by Thales, Secretarium, IDEMIA Secure Transactions, Quali-Sign and Consult Hyperion.It concluded the solutions were promising.

An offline CBDC would allow users to make transactions without an internet connection, offering several potential benefits:

• Financial Inclusion: Reaching individuals in remote areas with limited internet access.
• Resilience: Providing a payment option during internet outages or cyberattacks.
• Privacy: Enhancing privacy by reducing reliance on centralized intermediaries.

The Bank of England conducted technology trials with several companies, including Thales and Consult Hyperion, to evaluate the feasibility of various offline CBDC solutions.While the results were promising, these trials also highlighted the technical complexities involved in ensuring the security and integrity of offline transactions.

Tokenized Bank Deposits: A Simpler Alternative in the Short Term?

While the development of a full-fledged CBDC presents significant technical challenges, the Bank of England is also considering alternative approaches to digital currency.One such approach is the tokenization of bank deposits.

Tokenized bank deposits are essentially digital representations of funds held in commercial banks.They offer some of the benefits of a CBDC, such as faster and more efficient payments, without requiring the central bank to directly issue and manage the digital currency.

Deputy Governor Cunliffe suggested that tokenized bank deposits may be a more readily achievable alternative in the short term, as they leverage the existing infrastructure and expertise of commercial banks.This approach could provide a stepping stone towards a more comprehensive CBDC in the future.

Advantages of Tokenized Bank Deposits:

• Leverages Existing Infrastructure: Utilizes the existing banking system and its regulatory framework.
• Reduced Complexity: Simpler to implement compared to a full-fledged CBDC.
• Faster Time to Market: Can be deployed more quickly than a CBDC.

The Debate Surrounding CBDCs: Weighing the Pros and Cons

The concept of CBDCs has sparked considerable debate among policymakers, economists, and technologists.While proponents highlight the potential benefits, critics raise concerns about privacy, security, and the potential for central bank overreach.

Arguments in Favor of CBDCs:

• Improved Payment Efficiency: CBDCs can facilitate faster and cheaper payments, both domestically and internationally.
• Enhanced Financial Inclusion: CBDCs can provide access to financial services for unbanked and underbanked populations.
• Reduced Reliance on Cash: CBDCs can reduce the costs associated with managing physical cash.
• Innovation and Competition: CBDCs can foster innovation in the financial sector and promote competition among payment providers.
• Monetary Policy Effectiveness: CBDCs could potentially enhance the effectiveness of monetary policy by allowing central banks to directly influence consumer spending.

Arguments Against CBDCs:

• Privacy Concerns: CBDCs raise concerns about the potential for government surveillance of financial transactions.
• Security Risks: CBDCs are vulnerable to cyberattacks and fraud.
• Financial Stability Risks: A sudden shift from commercial bank deposits to CBDCs could destabilize the banking system.
• Central Bank Overreach: CBDCs could give central banks too much power over the economy and individual finances.
• Disruption to the Banking Sector: CBDCs could disintermediate commercial banks and reduce their role in the financial system.

Bridging the Skills Gap: Strategies for the Bank of England

Recognizing the critical need for technical expertise, the Bank of England must take proactive steps to bridge the skills gap.Several strategies could be employed:

1. Recruitment: Actively recruit skilled professionals in areas such as cryptography, DLT, cybersecurity, and data science.
2. Training and Development: Invest in training programs to upskill existing employees and equip them with the necessary technical skills.
3. Partnerships: Collaborate with universities, research institutions, and technology companies to leverage their expertise and resources.
4. Consultancy: Engage external consultants to provide specialized technical guidance and support.
5. Open Source Collaboration: Participate in open source projects related to CBDC development to learn from and contribute to the global community.

A combination of these strategies will be necessary to build a skilled workforce capable of developing and managing a secure and efficient CBDC.

Learning from Other Nations: Best Practices in CBDC Development

The Bank of England can also learn from the experiences of other countries that are further along in their CBDC journey.Several nations, including China, Sweden, and the Bahamas, have already launched or are piloting CBDCs.By studying their approaches, successes, and challenges, the BoE can gain valuable insights and avoid potential pitfalls.

For example, China's digital yuan (e-CNY) pilot program has provided valuable lessons in terms of user adoption, security, and regulatory considerations.Sweden's e-krona project has focused on exploring the technical feasibility of a CBDC and its impact on the banking system.The Bahamas' Sand Dollar, one of the world's first CBDCs, has demonstrated the potential of digital currencies to promote financial inclusion in small island nations.

The Future of the Digital Pound: A Timeline and Key Considerations

While the Bank of England has not yet made a definitive decision on whether to issue a CBDC, it is actively exploring the possibility.Deputy Governor Cunliffe has stated that there is a more than 50% chance that the UK will eventually issue a digital currency.

However, the timeline for a potential launch remains uncertain.The BoE is currently in the design phase, which involves extensive research, experimentation, and consultation with stakeholders.Once the design phase is complete, the bank will need to develop and test the technology, establish a regulatory framework, and educate the public about the digital pound.

Key Considerations for the Future of the Digital Pound:

• Public Acceptance: Ensuring that the public trusts and adopts the digital pound.
• Regulatory Framework: Establishing a clear and comprehensive regulatory framework that addresses issues such as privacy, security, and anti-money laundering.
• Cybersecurity: Implementing robust cybersecurity measures to protect the digital pound from cyberattacks and fraud.
• Interoperability: Ensuring that the digital pound can seamlessly interact with existing payment systems and potentially with other digital currencies.
• International Cooperation: Collaborating with other central banks and international organizations to develop global standards for CBDCs.

What Does This Mean For You?The Potential Impact of a UK CBDC

The introduction of a digital pound could have a significant impact on individuals and businesses in the UK.Here are some potential implications:

• Easier and Faster Payments: Making payments could become faster, cheaper, and more convenient, especially for cross-border transactions.
• Increased Financial Inclusion: Individuals who are currently unbanked or underbanked could gain access to financial services through the digital pound.
• Greater Control Over Your Money: You may have more control over how your money is used and be able to track your spending more easily.
• New Opportunities for Businesses: Businesses could benefit from lower transaction costs and new opportunities to innovate and offer digital services.
• Changes in the Banking Sector: The role of commercial banks could change as the digital pound gains traction, potentially leading to new financial products and services.

It's important to stay informed about the development of the digital pound and understand its potential implications for your personal and professional life.

Conclusion: Navigating the Path to a Digital Future

The Bank of England's acknowledgement that it *has no tech skills to issue CBDC yet* underscores the complexities involved in creating a successful central bank digital currency.While the UK recognizes the potential benefits of a digital pound, it must first address the critical skills gap that currently hinders its progress.By investing in recruitment, training, partnerships, and international collaboration, the BoE can build a skilled workforce capable of designing, developing, and managing a secure and efficient CBDC.The journey towards a digital future is ongoing, and the UK's success will depend on its ability to adapt, innovate, and prioritize security and privacy.While tokenized bank deposits may offer a simpler and more immediate alternative, the ultimate goal is to create a robust and accessible digital currency that benefits all citizens.The Bank of England has shown strong support to continue exploring a CBDC.The future of money is digital, and the UK needs to be prepared.