Following a successful Project Rosalind CBDC test, the BoE is making progress with developing and launching a digital pound.
The Bank of England (BoE) is moving closer to launching its Central Bank Digital Currency (CBDC) after its long test project on the potential benefits of the technology. The BoE launched Project Rosalind last year to help decide whether to float a CBDC.
The BoE undertook the CBDC project in collaboration with the Bank of International Settlements (BIS) to practicalize CBDC usage. According to a report the BIS published on Friday, the BoE’s CBDC could improve the payments landscape. The report notes that the CBDC could help people make payments faster and much easier. For organizations, the asset would help launch financial products and detect duplicity or fraud.
One way the BoE’s CBDC could help reduce fraud is to program settlement at a specific time or after a set event. For instance, an online vendor’s payment may only settle after a customer confirms that products received are satisfactory.
According to the BIS’ report:
“A well designed API layer could work with different private sector applications and central bank ledger designs and that a set of simple and standardized API functionalities could support a diverse range of use cases.”
The results from the first phase are positive. According to the BoE, the development and launch of a CBDC is “likely” and could happen sometime later. However, the Bank has not decided on a specific date or whether or not it would go ahead. It said a series of consultations are necessary in addition to support from the UK Treasury.
London-based blockchain technology company Quant worked on the CBDC project between the BoE and the BIS. Quant founder and CEO Gilbert Verdian applauds the initiative because he believes the UK’s existing financial system is not well-suited for a digital society.
Testing the BoE’s CBDC
The first phase of the CBDC started last year and featured eight organizations from finance and tech. Using Quant’s framework, Mastercard created a CBDC debit card, while the Bank of Canada created an account for children that paid a certain amount when the child completes a chore.
Other participants include Barclays Plc, BNY Mellon, and Revolut. Barclays used the CBDC to test cash payments released to vendors only after the buyers receive their items in good condition.
Verdian said this “conditional logic” feature is great for preventing fraud instead of working hard at fraud protection. Verdian also said these features could make the digital pound one of the world’s most preferred currencies.
Officials at the BoE and the UK Treasury believe a CBDC would have numerous benefits. The BoE’s deputy governor for monetary policy Ben Broadbent said the digital pound would be cheaper for businesses due to low settlement costs and faster for online payments.
Many expect the digital pound, fondly called the “Britcoin,” to launch sometime at the end of 2023.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
