Bank of England Reveals Plan to Test Wholesale CBDC and Digital Ledger

The Bank of England (BoE) has announced plans to conduct a series of experiments with distributed ledger technology (DLT) and wholesale central bank digital currencies (wCBDC).

This initiative seeks to keep pace with the evolving payments landscape by evaluating the benefits and risks of developing financial technologies.

Bank of England Explores Wholesale CBDC to Boost Financial Stability

Governor Andrew Bailey stressed the significance of the wholesale CBDC (wCBDC) experiment in a discussion paper published on July 30 , saying:

“Confidence in money and payments is fundamental to the Bank’s responsibility for monetary and financial stability. As innovation in this space continues, our role must also evolve to support a robust and dynamic U.K. economy.”

This initiative places the BoE alongside other central banks globally exploring the potential of DLT and wCBDCs.

This global exploration, often conducted through collaborations like the Bank for International Settlements (BIS), seeks to understand the implications of these technologies for monetary systems.

For instance, the BoE actively participates in the BIS’ Project Agora , a project testing the exchange of tokenized assets across multiple currencies on a unified platform involving seven banks.

The bank’s discussion paper outlines two primary approaches for central bank money to interact with distributed ledger platforms: synchronization and wholesale CBDCs.

Synchronization involves transferring an asset from one platform to another using the bank’s Real Time Gross Settlement (RTGS) ledger.

Wholesale CBDCs, on the other hand, are digital tokens issued by central banks for use exclusively by financial institutions, which could facilitate interactions with programmable platforms.

BoE’s Planned Use Cases for CBDC Trials And Stakeholder Input

The planned wcBDC trials will explore various use cases. One area of focus is delivery versus payment (DvP) scenarios, which involve settling transactions for primary bond issuances and secondary market trades.

Additionally, the trials will examine digital securities transactions, specifically those where end users make tokenized deposit payments.

Building on the synchronization experiments from Project Meridian FX , the trials will also examine Payment versus Payment (PvP) scenarios and potential wCBDC applications.

Interoperability, particularly for cross-border payments, will be another key area of focus. These interoperability tests will be coordinated with global initiatives, including the BIS’s Project Agora.

To ensure the stability of the monetary system, the Bank of England is collaborating with the Treasury and Financial Conduct Authority to maintain the interchangeability of all forms of money , even with the introduction of stablecoins.

Recognizing the importance of collaboration, the BoE is actively seeking stakeholder input on potential use cases for these disruptive technologies.