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 report on progress report outlining possible use cases of a CBDC, business models, and a roadmap for the testing phase focused on blockchain-powered payment systems. Dubbed “Digital Pound Labs,” the initiative is expected to begin this year and aims to foster partnerships between government authorities and private players in the financial sector.

The BoE highlighted the importance of engaging local and international participants to identify issues in existing payment ecosystems that a digital pound or CBDC could help solve.

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

No decision yet on UK CBDC

Authorities have not concluded on the advancement of a CBDC program despite the official opening of the Digital Pound Lab, according to the BoE document. According to the report, the bank and HM Treasury plan to first “develop a more detailed policy and technology framework” based on the consultation carried out during the design phase. The BoE estimates this could take years.

Additionally, a digital pound would require approval from the UK Parliament, followed by more public consultation before primary legislation is introduced. Legislators previously exhorted caution regarding CBDCs in June 2023 after the central bank teased a sovereign digital currency in February.

No decision has been made on whether to proceed with a digital book. Having completed the design phase over the next two years, including taking into account developments in the wider payments landscape, the Bank and the Government will assess the policy case for a digital pound and determine whether whether or not they should move forward.

BoE progress report