On Friday, the Central Bank of the United Kingdom, the Bank of England made the announcement that it had arrived at an agreement on a twelve-month research joint project on Central Bank Digital Currency, or CBDC, with the MIT or Massachusetts Institute of Technology Media Lab Digital Currency Initiative, or DCI.
In a statement, the bank had revealed that the project is only for research purposes, and there are no plans as such to build an operational CBDC.
2020 was when the bank began understanding CBDC and even released a discussion paper in March of the same year. The DCI responded to the paper with a discussion on how the objectives mentioned in the paper can be fulfilled with a CBDC. Last April, the bank and the treasury led an exploratory task force regarding the matter. The latest discussion of the bank on CBDC was released on Thursday.
Meanwhile, others also took part in discussion with the House of Lords Economic Affairs, showing mixed sentiments regarding the release of a potential digital pound early this year, noting both the advantages and challenges of the CBDC. As it points out, the advantages are cheaper and faster cross-border payments and speed of settlement. At the same time, the challenges can be a risk to privacy and financial stability.
The Bank of England joins the Bank of Canada and the Federal Reserve Bank of Boston as research partners on CBDC at the originator of the OpenCBDC project, DCI. The announcement regarding a year-long joint research effort of the Bank of Canada came last year; the Boston Fed, however, collaborated with the DCI in 2020.
It is also interesting to note that MIT is not the only one in the field. Currently, around 60 projects are researching on CBDCs, with around 15 pilot projects in progress, including China’s very own digital yuan.
Malaysia, Singapore, Australia, and South Africa were part of Dunbar, the Bank of International Settlement Innovation Hub project. The Bahamas and Nigeria have already released their CBDC; meanwhile, Jamaica is expected to do the same in the coming quarter.
Private fintech firm, Bitt developed Nigeria’s eNaira.
As earlier reported, on the other hand, the latest reports reveal that the Bank of England has begun working on a new framework that will push the cryptocurrencies and stablecoins within existing regulatory boundaries.
The report also highlights the two major concerns of the regulators, the first being the fear that Russians can evade sanctions imposed on it after its invasion of Ukraine. Another concern is the possible threat to the financial stability of the U.K in the future by crypto assets.