BANK OF ENGLAND STATEMENT ON FUTURE DIGITAL CURRENCY AND BLOCKCHAIN TECH

Last updated: June 19, 2025, 20:42 | Written by: Charlie Shrem

The financial landscape is on the cusp of a major transformation, and at the heart of it all lies the Bank of England's (BoE) exploration into a future digital currency and the underlying blockchain technology.The BoE's recent statements and ongoing research initiatives signal a significant shift toward modernizing payment systems and addressing the challenges posed by unregulated tech in the commercial banking sector. This statement suggests the bank is aiming to match or exceed the privacy standards of existing electronic payment systems. The bank began its digital pound exploration in 2025 when it established a dedicated task force. This group was charged with examining potential designs and implications of a central bank digital currency.This isn't about replacing cash entirely, but rather supplementing it with a digital pound that’s seamlessly exchangeable and fosters innovation. The Bank of England is reluctantly pressing on with work to create a form of digital money accessible to the general public, as commercial banks risk failing to keep up with less-regulated techThe central bank is carefully considering the implications, from technological implementation to privacy concerns, taking a measured approach to ensure a smooth and secure transition. The Bank of England s move towards developing a retail central bank digital currency (CBDC) signifies a crucial pivot in the UK s financial landscape. Governor Andrew Bailey s remarks at the Annual International Banking Seminar underscore a growing urgency to modernize payment systems, particularly in the face of stagnation withinThis article delves deep into the BoE's agenda, exploring the drivers behind this digital transformation, the proposed framework, and the potential impact on the UK economy and beyond. The research agenda also includes how a central bank digital currency could be technically implemented. Next year, they expect to create an official timetable for the future changes. BlockchainWe will explore the latest announcements, research, and what it means for the future of money.

The Driving Force Behind the Bank of England's Digital Currency Ambitions

Several factors are propelling the Bank of England's interest in a Central Bank Digital Currency (CBDC).Perhaps the most pressing is the need to modernize existing payment systems.Governor Andrew Bailey highlighted the stagnation within the commercial banking sector as a key motivator. What is central bank digital currency? Central bank digital currency (CBDC) is money that a country s central bank can issue. It s called digital (or electronic) because it isn t physical money like notes and coins. It is in the form of an amount on a computer or similar device.Less-regulated tech companies are rapidly innovating in the financial space, potentially leaving traditional banks behind. A digital pound, issued by the Bank of England, would be seamlessly exchangeable with cash and bank deposits, ensuring the continuity of a trusted, uniform and accessible means of payment. As a publicly provided platform, it could foster innovation by enabling a varied range of private sector firms to develop innovative and user-friendly services.A digital pound offers a way for the BoE to ensure the continuity of a trusted, uniform, and accessible means of payment for all.

Beyond keeping pace with technological advancements, a CBDC also presents opportunities for:

Innovation: A publicly provided platform could enable private sector firms to develop innovative and user-friendly financial services.
Financial Inclusion: A digital pound could potentially improve access to financial services for underserved populations.
Efficiency: Streamlined payment processes and reduced transaction costs are potential benefits.
Resilience: A CBDC could provide a more resilient payment system, less susceptible to disruptions affecting traditional infrastructure.

Key Research Areas and Timelines

The Bank of England Agenda for Research outlines five key areas the BoE intends to conduct research into over the next three years.Each area has four priority topics for 2025.These are critical for understanding the BoE’s direction.

The research agenda also explicitly includes investigation into how a central bank digital currency could be technically implemented. Given at FS tech: The Future of FinTech Conference. We use necessary cookies to make our site work (for example, to manage your session).The Bank of England expects to create an official timetable for future changes, although they are proceeding cautiously. The CBDC Technology Forum looks at the technology a central bank digital currency might use. The forum enables us to involve people with a wide range of expertise and perspectives. This helps us to understand the technological challenges of a designing, implementing and operating a CBDC.They’ve indicated that they will not rush into launching a digital pound. Automated Market Makers (AMMs) A decentralised exchange that uses algorithmic mechanisms to facilitate the trading of digital assets. Bank Bank of England. Bank DSS Rules Instrument 2025 The rules instrument containing the rules that apply to sandbox entrants in the DSS (Bank DSS Rules Instrument).Instead, the central bank and the government will take up to two years to decide on its potential rollout.This cautious approach reflects the complex considerations surrounding CBDCs, including privacy concerns and the evolving payments landscape.

The Digital Pound: Design and Functionality

The proposed digital pound, also referred to as ""digital sterling"" or ""Britcoin,"" is designed to supplement, not replace, physical cash. Central banks also need to modernise. In that regard, there are over 50 central banks that are researching and experimenting with their own digital version of cash central bank digital currency. The Bank of Canada and the Bank of England have been collaborating closely on these efforts. footnote [23]It would be issued by the Bank of England and be seamlessly exchangeable with cash and bank deposits. Bank of England statement on Central Bank Digital Currency, April 2025. G7 Finance Ministers, June 2025 Communique . Bank for International Settlements and Bank of England launch Innovation Hub London centre .This is a crucial aspect, ensuring the continuity of a trusted means of payment.

Here are some key features of the proposed digital pound:

Government-Backed: It will be backed by the Bank of England, providing stability and trust.
Interoperable: Seamlessly exchangeable with existing forms of money.
Accessible: Designed to be accessible to the general public.
Innovative Platform: A platform for private sector innovation in financial services.

The Bank of England and HM Treasury published a consultation paper that set out their assessment of the case for a retail central bank digital currency in February 2025. The Bank of England and HM Treasury are in the design phase for the creation of a digital pound or central bank digital currency. A consultation paper outlined the framework as a precursor to aThis paper formed a crucial part of the exploration phase.

Addressing Privacy Concerns

One of the biggest hurdles for CBDCs is public acceptance, which hinges heavily on addressing privacy concerns.The Bank of England recognizes the importance of privacy and aims to match or exceed the privacy standards of existing electronic payment systems.This is a complex challenge, requiring a careful balance between privacy, security, and regulatory oversight.The BoE has stressed that user data must be protected and that the digital pound will not be used for mass surveillance.

How will the Bank of England ensure privacy?

**Data Minimization:** Collecting only the necessary data for transactions.
**Transparency:** Being open and transparent about how data is used.
**Independent Oversight:** Establishing independent oversight bodies to monitor privacy practices.
**User Control:** Giving users control over their data and how it is used.

The Role of Blockchain Technology

While the term ""blockchain"" is often associated with cryptocurrencies, the Bank of England's focus is on leveraging the *technology* behind blockchain for its CBDC.Blockchain, or Distributed Ledger Technology (DLT), offers potential benefits such as:

Transparency: Increased transparency in transaction processing.
Security: Enhanced security through cryptographic techniques.
Efficiency: Faster and more efficient payment processing.

The BoE established the CBDC Technology Forum to explore the technology that a central bank digital currency might use.The forum enables the Bank to involve people with a wide range of expertise and perspectives. I present a model of cryptocurrency price formation that endogenizes both the financial market for coins and the fee-based market for blockchain space. A cryptocurrency has two distinctive features: a price determined by the extent of its usage as money, and a blockchain structure that restricts settlement capacity.This helps them understand the technological challenges of designing, implementing, and operating a CBDC.

The Digital Securities Sandbox (DSS)

The Bank of England (the Bank) and Financial Conduct Authority (FCA) (collectively the regulators) are consulting on their proposed approach to operating the Digital Securities Sandbox (DSS). A central bank spokesperson did not immediately return a request for comment. The House of Commons Treasury Committee advised the Bank of England and HM Treasury to thoughtfully consider the introduction of a central bank digital currency (CBDC) in the UK. Read more: Wholesale CBDCs and automatic market makers could be the perfect pair, BIS findsThe DSS is an initiative run by the regulators that will help facilitate the adoption of innovative technology in digital assets in the UK.This is a crucial step in fostering innovation within the digital asset space while ensuring appropriate regulatory oversight.

Key Features of the DSS

**Regulatory Support:** Provides a safe space for firms to test innovative technologies.
**Collaboration:** Facilitates collaboration between regulators and industry participants.
**Innovation Focus:** Encourages the development of new digital asset products and services.

International Collaboration

The Bank of England is actively collaborating with other central banks, such as the Bank of Canada, on their CBDC efforts. The Federal Reserve Bank of Boston and the Digital Currency Initiative at the Massachusetts Institute of Technology today released the findings of their initial technological research into a central bank digital currency, or CBDC.This collaboration is crucial for sharing knowledge, best practices, and addressing common challenges. Bank of England publishes Discussion Paper on New Forms of Digital Money and summarises responses to the 2025 Discussion Paper on Central Bank Digital Currency The Bank of England has today published a Discussion Paper which aims to broaden the debate around new forms of digital money and seek views on the Bank s emerging thoughts on the subject.The Bank for International Settlements (BIS) and the Bank of England launched an Innovation Hub London centre. The Bank of England has indicated that it will not rush into launching a digital pound. Instead, the central bank and the government will take up to two years to decide on its potential rollout. This cautious approach reflects the complex considerations surrounding CBDCs, including privacy concerns and the evolving payments landscape.This initiative focuses on researching and developing innovative financial technologies.

The Stablecoin Sandwich Approach

One specific area of collaboration involves exploring an approach known as a ""stablecoin sandwich."" This involves a bank converting the local currency to a stablecoin and instantly transferring it to another bank on a blockchain network, and the recipient bank credits the beneficiary account in its domestic currency. These arrangements will likely follow an approach known as a stablecoin sandwich, where a bank converts the local currency to a stablecoin and instantly transfers it to another bank on a blockchain network, and the recipient bank credits the beneficiary account in its domestic currency. 8 What to watch: Governance and greater participation.This approach offers a potential pathway for seamless cross-border payments.

Central Bank Digital Currency: What it is NOT

It’s important to distinguish a Central Bank Digital Currency from other forms of digital money:

Cryptocurrencies: Unlike cryptocurrencies like Bitcoin, a CBDC is issued and backed by the central bank, providing stability and trust. Finally, let me turn to our work with the Treasury on central bank digital currency, or, to put it more plainly on the issuance by the Bank of England of a digitally native pound sterling. Our plan remains to issue a consultative report around the end of year setting out the next steps that we propose.Cryptocurrencies are decentralized and often subject to significant price volatility.
Stablecoins: While some stablecoins aim to maintain a stable value by being pegged to a fiat currency, they are typically issued by private companies and may not have the same level of regulatory oversight as a CBDC.The BoE considers systemic stablecoins to be those that should be regulated by the Bank of England and backed by central bank money, making them very safe and easily interchangeable with regular currency, maintaining the singleness of money.

Engagement and Technology Forums

The Bank of England and HM Treasury announced the membership of the central bank digital currency (CBDC) Engagement and Technology Forums.The creation of these groups was announced in April 2025, alongside the CBDC Taskforce which coordinates the exploration of a potential UK CBDC.These forums play a critical role in gathering diverse perspectives and ensuring that the development of a digital pound is informed by a wide range of expertise.

The Role of Automated Market Makers (AMMs)

Automated Market Makers (AMMs) are decentralized exchanges that use algorithmic mechanisms to facilitate the trading of digital assets. The Bank of England and HM Treasury have today announced the membership of the central bank digital currency (CBDC) Engagement and Technology Forums. The creation of these groups was announced in April 2025, alongside the CBDC Taskforce which coordinates the exploration of a potential UK CBDC.While not directly related to the core functionality of a CBDC, AMMs could play a role in the broader digital asset ecosystem and potentially interact with a digital pound in the future.

Challenges and Considerations

Despite the potential benefits, the Bank of England faces several challenges in developing a digital pound:

Cybersecurity: Ensuring the security and resilience of the CBDC infrastructure against cyberattacks is paramount.
Scalability: The CBDC system must be able to handle a high volume of transactions efficiently.
Interoperability: Ensuring interoperability with existing payment systems and international CBDCs.
Financial Stability: Carefully managing the potential impact on the banking sector and overall financial stability.

The House of Commons Treasury Committee advised the Bank of England and HM Treasury to thoughtfully consider the introduction of a central bank digital currency (CBDC) in the UK.This underscores the importance of careful planning and risk management.

What to Watch For: Governance and Greater Participation

As the Bank of England progresses with its CBDC exploration, it is crucial to watch for developments in governance and greater participation.A well-defined governance framework will ensure accountability and transparency. The Bank of England (BoE) has taken a major step forward in its exploration of a central bank digital currency (CBDC) with the announcement of a dedicated digital pound lab. The lab looks to explore the potential applications and technological framework of a government-backed digital currency.Encouraging greater participation from industry stakeholders, academics, and the public will help shape the design and implementation of a digital pound that meets the needs of all users.

Wholesale CBDCs and Automatic Market Makers

Research from the Bank for International Settlements (BIS) suggests that wholesale CBDCs and automatic market makers (AMMs) could be a beneficial combination.Wholesale CBDCs are designed for use between financial institutions, while AMMs facilitate the trading of digital assets. The importance to the BoE of a central bank digital currency is highlighted in the Bank of England Agenda for Research, , published on . This document sets out five aspects of the UK economy that the BoE intends to conduct research into over the next three years, each listing four priority topics for 2025 .This pairing could improve efficiency and transparency in wholesale financial markets.

The Future of FinTech

The Bank of England's exploration of a digital pound is closely tied to the future of FinTech. Bank of England publishes policy for omnibus accounts in RTGS. Bank of England statement on Central Bank Digital Currency. From master masons to information architects: how standards can transform reporting (and bring benefits well beyond it) - speech by Gareth Ramsay. Open data for SME finance: what we proposed and what we have learntAs commercial banks grapple with the challenge of keeping up with less-regulated tech companies, a CBDC offers a potential solution.It could provide a level playing field and foster innovation by enabling a wider range of firms to participate in the digital economy.

Conclusion: Key Takeaways and the Path Forward

The Bank of England's statement on the future of digital currency and blockchain tech marks a significant step towards modernizing the UK's financial system. The Bank of England (the Bank) and Financial Conduct Authority (FCA) (collectively the regulators ) are consulting on their proposed approach to operating the Digital Securities Sandbox (DSS). The DSS is an initiative run by the regulators that will help facilitate the adoption of innovative technology in digital assets in the UK.While a digital pound is not yet a reality, the BoE's ongoing research, consultations, and collaborative efforts demonstrate a commitment to exploring its potential benefits and addressing the associated challenges. Skip to content. ExploreThe digital pound could potentially foster financial inclusion, innovation, and efficiency. Under the 2025 proposals, systemic stablecoins would be regulated by the Bank of England and backed by central bank money, making them very safe and easily interchangeable with regular currency, maintaining the singleness of money . However, the stablecoin issuer would earn zero interest, undermining a key business model.The journey is deliberate and careful, prioritizing privacy, security, and financial stability.The upcoming timetable and further announcements will be crucial in shaping the future of money in the UK.

Key takeaways:

The Bank of England is actively exploring a Central Bank Digital Currency (CBDC), known as the digital pound.
The digital pound is intended to supplement, not replace, physical cash.
Key drivers include modernizing payment systems, fostering innovation, and addressing the challenges posed by unregulated tech.
Privacy, security, and financial stability are paramount concerns.
The BoE is collaborating with other central banks and engaging with industry stakeholders.

Stay informed about the latest developments and contribute to the conversation.The future of money is evolving, and your voice matters. In February 2025, The Bank of England and HM Treasury published a consultation paper that set out our assessment of the case for a retail central bank digital currency. Bank of England (2025), The impact of de-tiering in the United Kingdom s large-value payment system.Visit the Bank of England's website for more information and updates.