Bank of England Could Mothball Digital Pound Project

The Bank of England is considering pausing its plans to create a digital currency.

That’s according to a report Tuesday (July 22) from Bloomberg News, which calls this the latest sign of declining enthusiasm for central bank digital currencies (CBDCs) around the world.

The central bank (BOE) has been quietly pushing the financial sector to instead focus on payment innovations that could yield similar benefits without the creation of a CBDC, the report said, citing sources familiar with the matter.

Those sources said the BOE wants to be prepared to debut a digital pound if it is someday warranted, but is willing to hold off if private businesses keep introducing new digital payment technologies. A spokesperson for the BOE declined to comment when reached by PYMNTS.

Bloomberg notes that this marks a shift in the bank’s tone, as the BOE had said two years ago that it was “likely” the country would need a CBDC.

However, BOE Governor Andrew Bailey has recently expressed doubts about CBDCs and has instead focused on banks offering tokenized deposits, the report added.

There are indications the CBDC efforts haven’t completely faded. The bank’s recently published Financial Services Growth and Competitiveness Strategy  includes a section on payments which notes: “Continuing exploration of a digital pound: the UK’s potential retail central bank digital currency, which could support innovation and competition in payments.”

England isn’t the only place where interest in state-backed digital currencies is declining amid the rise of stablecoins. Among them is South Korea, which has paused its CBDC effort amid a new focus on stablecoins, according to an earlier Bloomberg report.

And as PYMNTS wrote last week, the recent passage of the GENIUS Act shows that “the political momentum favors stablecoins,” rather than central banks.

Several Republicans had wanted to include a provision in the act that would have banned the Federal Reserve from issuing a CBDC. That proposal didn’t make it into the act, though Congress agreed to link the Anti-CBDC bill to the National Defense Authorization Act (NDAA), widely seen as a “must-pass” piece of legislation.

“The U.S. plans to use stablecoins as a means of maintaining the hegemony of the U.S. Dollar and by dollarising economies around the world from the ground up,” Simon McLoughlin, CEO of Uphold, wrote on LinkedIn. “The passing of this bill throws the weight of the world’s largest economy behind blockchain technology and digital assets.”

Still, not every banking institution has thrown their support behind stablecoins. For example, a recent Bank for International Settlements report argued that the digital currencies “perform poorly” as a form of sound money.

“The document argued that most stablecoins fail critical criteria for a currency, such as price stability, universal acceptability and trust. It also pointed to the fact that stablecoins are frequently exploited by criminals and lack the elasticity of credit that underpins modern financial systems,” PYMNTS wrote.