After the success of the Rosalind CBDC project, the Bank of England is making progress in developing and launching the digital pound.
The Bank of England (BoE) is close to launching its central bank digital currency (CBDC) after a long test project on the potential benefits of the technology. The Bank of England launched Project Rosalind last year to help decide whether to float CBDCs.
The Bank of England implemented a CBDC project in collaboration with the Bank for International Settlements (BIS) to enable the use of CBDCs. According to a report published by the Bank for International Settlements on Friday, the central bank of the Bank of England could improve the payments landscape. The report states that CBDCs can help people make payments much faster and easier. For organizations, the asset will help launch financial products and detect duplication or fraud.
One way that Bank of England CBDCs can help reduce fraud is by programming settlement at a specific time or after a specific event. For example, online seller payments may only be settled after the customer confirms that the products received are satisfactory.
According to the Bank for International Settlements report:
“A well-designed API layer can work with various private-sector applications and central bank ledger architectures, and a set of simple, unified API functions can support a wide variety of use cases.”
The results of the first stage are positive. According to the Bank of England, the development and launch of a CBDC is “potential” and could happen at a later date. However, the bank has not made a decision on an exact date or whether or not it will go ahead. She said a series of consultations was necessary, as well as support from the British Treasury.
London-based blockchain technology firm Quant worked on a CBDC project between the Bank of England and the Bank for International Settlements. Quant founder and CEO Gilbert Verdian welcomes the initiative as he believes the current UK financial system is not well suited to a digital society.
Bank of England CBDC Test
The first phase of the CBDC started last year and involved eight institutions from finance and technology. Using Quant’s Framework, Mastercard created a CBDC debit card, while the Bank of Canada created an account for children who paid a certain amount when the child completed a chore.
Other participants include Barclays plc, BNY Mellon and Revolut. Barclays used CBDC to test cash payments that are only issued to sellers after buyers have received their goods in good condition.
This “conditional logic” feature is great for fraud prevention, Verdian said, rather than the hard work of fraud protection. Verdian also said that these features could make the digital pound one of the most preferred currencies in the world.
Officials of the Bank of England and the UK Treasury Believes CBDC will have many benefits. Bank of England Deputy Governor for Monetary Policy Ben Broadbent said digital pounds would be cheaper for businesses due to lower settlement costs and faster for online payments.
Many expect the launch of the digital pound, fondly called “Britcoin,” sometime at the end of 2023.
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Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify cryptocurrency stories down to the bare essentials so that anyone anywhere can understand without much background knowledge. When he’s not deep into cryptocurrency stories, Tolo enjoys music, loves to sing, and is a movie lover.