The Bank of England is planning to launch a sandbox to test a potential central bank digital currency or government-issued digital pound.

On January 14, the Bank of England published the progress a report Identify potential use cases for central bank digital currency (CBDC), business models, and a roadmap for a testing phase focused on blockchain-powered payment systems. Dubbed “Digital Pound Labs,” the initiative is set to debut this year, with the aim of strengthening partnerships between government authorities and private financial industry players.

The Bank of England stressed the importance of engaging local and international participants to identify issues in current payment systems that a digital pound or central bank digital currencies (CBDC) could help address.

To this end, the Bank of England announced the closure of the Technology Forum, which previously served as a feedback channel for public and institutional input. Instead, the Digital Pound Lab will take a more “hands-on” approach, working alongside the Academic Advisory Group and Engagement Forum as part of the Bank’s advisory structure.

There is no decision on a UK central bank digital currency yet

Authorities have not reached an agreement on developing a central bank digital currency program despite officially opening a digital pound lab, according to a Bank of England paper. According to the report, the Bank and HM Treasury first plan to “develop a more detailed policy and technology framework” based on the consultations achieved during the design phase. The Bank of England expects this could take years.

Also, the digital pound will require the UK Parliament's stamp of approval, followed by further public consultation before initial legislation is introduced. Previously legislators urge Caution on CBDCs in June 2023 after central bank Excited Sovereign digital currency in February.

No decision has been made on moving forward with the digital pound. After completing the design phase over the next two years, including taking into account developments in the wider payments landscape, the bank and government will assess the policy status of the digital pound and decide whether to proceed.

Bank of England progress report