Bank of England Shifts to Private Innovation as CBDC Hesitation Grows

The Bank of England has faced growing pressure from the Reform Party to advance its digital pound initiative, even as the central bank signals increasing skepticism about the necessity of a central bank digital currency (CBDC) for retail use. The Reform Party, which has positioned itself as a vocal advocate for technological innovation in monetary systems, has criticized the Bank’s cautious approach, arguing that a digital pound could enhance financial inclusion and strengthen the UK’s competitive edge in global payments The Digital Commonwealth, ^[1]. However, Bank of England Governor Andrew Bailey has publicly questioned the need to “create new forms of money” when existing payment systems could be improved through digital upgrades Brave New Coin, ^[2].

The central bank’s hesitation reflects a broader global trend of retreating from CBDC projects. Countries such as Canada, Australia, and Nigeria have abandoned or paused their retail digital currency initiatives, citing low adoption rates and public resistance. The US, under President Trump, issued an executive order in January 2025 banning the development of a CBDC, citing risks to financial stability, privacy, and national sovereignty Brave New Coin, ^[2]. In the UK, the Bank of England has shifted its focus toward encouraging private-sector innovation, urging companies to develop payment solutions that could replicate the benefits of a digital pound without government oversight Brave New Coin, ^[2].

Public sentiment has played a critical role in dampening enthusiasm for the digital pound. Surveys indicate that a majority of UK citizens oppose the concept of a government-controlled digital currency, with concerns over privacy and surveillance being the primary objections. Critics fear that a digital pound could enable the state to monitor spending habits or impose restrictions on transactions. The Bank of England has emphasized that any digital pound would not replace cash and would be issued through private-sector wallets, but these assurances have not fully alleviated public skepticism Brave New Coin, ^[2].

The Bank’s internal debates also highlight the unresolved economic rationale for a digital pound. While officials previously argued that a CBDC could address gaps in the payments system, recent analyses suggest that private-sector alternatives—such as stablecoins and digital bank deposits—already provide many of the same benefits. For instance, stablecoins like USDC and EURC have gained traction in on-chain transactions, offering fast, low-cost payments without the volatility associated with cryptocurrencies. The Bank has acknowledged that commercial alternatives must be rigorously evaluated before determining whether a digital pound is necessary .

Despite the uncertainty, the Bank of England has not officially terminated the digital pound project. A “Digital Pound Lab” is set to launch later in 2025 to test potential use cases and gather feedback from businesses and consumers. However, the initiative remains contingent on public and political support, with any launch requiring parliamentary approval and new privacy-protecting legislation. The earliest plausible timeline for a digital pound remains the second half of the decade, assuming the project progresses Brave New Coin, ^[2].

The debate over the digital pound underscores a broader ideological clash between government-controlled monetary systems and private-sector innovation. While proponents argue that a CBDC could enhance the resilience of the UK’s financial infrastructure, opponents warn of the risks of centralization and state overreach. As global CBDC efforts wane, the Bank of England’s next steps will likely shape the trajectory of digital currency policy in the UK and beyond.