Bank of England rethinks £24M digital pound CBDC amid public backlash and global trend

The Bank of England is reconsidering its digital pound central bank digital currency (CBDC) project after investing £24 million in research and development since 2021, amid mounting public and political resistance. Governor Andrew Bailey has signaled skepticism about the necessity of a consumer-focused CBDC, emphasizing that private sector innovations could achieve similar outcomes without the need for a state-backed digital currency. This shift follows over 50,000 responses to a public consultation, many raising privacy concerns and questioning the project’s relevance. Critics argue the initiative lacks clear economic justification, particularly as cash usage has plummeted from 51% in 2013 to 12% in 2023, threatening the Bank’s traditional revenue model derived from physical currency.

Bailey’s preference for tokenized bank deposits over CBDCs aligns with his concerns about stablecoins siphoning money from the banking system and destabilizing monetary control. The Bank’s retreat contrasts with its earlier stance, which deemed digital pounds “likely” necessary for future monetary systems. Instead, the focus is now on regulating emerging risks, such as private stablecoins and crypto exposure for banks. The BOE plans to restrict UK banks’ crypto exposure to 1% of investments by 2026 under Basel Committee standards, while the Financial Conduct Authority advances a 2026 regulatory framework for crypto custody and stablecoins.

Opponents, including former Bank economist Neil Record and former MP Lord Forsyth, have labeled the digital pound initiative a “white elephant,” citing wasted taxpayer funds and redundancy compared to existing banking infrastructure. Public feedback highlighted fears of surveillance and systemic risks, such as mass withdrawals into state-backed digital currencies during crises. The Bank’s research also noted diminishing benefits from CBDCs as private-sector payment technologies advance.

Globally, enthusiasm for CBDCs is waning. The U.S. has paused its digital dollar work under the Trump administration’s GENIUS Act, while South Korea halted its pilot program. Only the European Central Bank continues pushing its digital euro project. This trend underscores a broader reevaluation of CBDCs as alternatives to private-sector innovations gain traction.

The Bank of England maintains the option to launch a CBDC if needed but prioritizes private-sector solutions. Bailey warned that unregulated digital currencies could fragment financial systems and undermine trust in sovereign money. The central bank’s evolving strategy reflects a balancing act between preserving monetary control and adapting to technological shifts.

[1] [2] [3]

Source:

[1] [Bank of England Considers Abandoning Digital Pound CBDC Project Amid Growing Opposition] https://cryptonews.com/news/bank-of-england-considers-abandoning-digital-pound-cbdc-project-amid-growing-opposition/

[2] [Bank of England Considers Abandoning Digital Pound CBDC Project Amid Growing Opposition] https://cryptonews.com/news/bank-of-england-considers-abandoning-digital-pound-cbdc-project-amid-growing-opposition/

[3] [Bank of England Considers Abandoning Digital Pound CBDC Project Amid Growing Opposition] https://cryptonews.com/news/bank-of-england-considers-abandoning-digital-pound-cbdc-project-amid-growing-opposition/