U.K. Central Bank opens Digital Pound Labs for CBDC test

The Bank of England plans to launch a sandbox to test a potential central bank digital currency, or government-issued digital pound.

On January 14, the BoE published a progress report outlining CBDC’s potential use cases, business models, and testing phase roadmap focusing on blockchain-powered payment systems. The initiative, called “Digital Pound Labs”, will debut this year, aiming to foster partnerships between government officials and private financial sector players.

The BoE emphasized the importance of engaging both local and international participants to identify issues in existing payment ecosystems that the digital pound, or CBDC, could help with.

To achieve this, the BoE announced the closure of the Technology Forum, which previously served as a feedback channel for public and institutional input. Instead, Digital Pound Lab will take a more “hands-on” approach, working with the Academic Advisory Group and Engagement Forum as part of the bank’s advisory structure.

No decision yet on UK CBDC

According to the BoE report, officials have not yet reached a conclusion on advancing a CBDC program despite the official launch of the Digital Pound Lab. According to the report, the bank and HM Treasury plan to “develop a more detailed policy and technology framework”, based primarily on consultations held at the design stage. The BoE predicts this could take years.

Additionally, the digital pound will need the UK Parliament’s stamp of approval, followed by further public consultation before primary legislation comes into force. MPs had previously urged caution on CBDCs in June 2023 after the central bank teased a sovereign digital currency in February.

No decision has been made on whether to continue with the digital pound. Once the Bank and Government have completed the design phase over the next few years, taking into account developments in the wider payments landscape, they will assess the policy situation on digital sterling and decide whether to proceed.

BoE progress report