On 19 April 2021, the Bank of England (BoE) and HM Treasury (HMT) released a statement announcing the joint creation of a Central Bank Digital Currency (CBDC) Taskforce. The Chancellor has also announced ambitious and complementary plans to encourage growth of UK fintechs and “cement the UK’s position as the world’s pre-eminent financial centre.

These announcements represent a significant endorsement of the recommendations made in the recently published Kalifa Review of UK Fintech and Lord Hill’s UK Listing Review.

CBDC Taskforce

The CBDC Taskforce will explore the viability of implementing a CBDC in the UK – a form of digital money issued by the BoE that households and businesses could use alongside cash and bank deposits.

No fixed decisions have been made on whether to introduce a CBDC in the UK, but the CBDC Taskforce will seek to engage with a wide variety of stakeholders on the opportunities and risks of doing so. According to the announcement, the CBDC Taskforce will:

  • “Coordinate exploration of the objectives, use cases, opportunities and risks of a potential UK CBDC.”
  • “Guide evaluation of the design features a CBDC must display to achieve our goals.”
  • “Support a rigorous, coherent and comprehensive assessment of the overall case for a UK CBDC.”
  • “Monitor international CBDC developments to ensure the UK remains at the forefront of global innovation.”

To support the CBDC Taskforce in its work, the BoE has also announced the creation of a CBDC Engagement Forum and a CBDC Technology Forum. Between them, these forums will gather strategic input on and assess the practicalities of the non-technological and technological aspects of designing, implementing and operating a CBDC. A CBDC Unit will also be established as a new division of the BoE to lead on the internal scoping and external engagement in relation to developing a CBDC.

As outlined in our previous blog post on CBDCs, the BoE has been considering how central banking might adapt to meet the needs of an increasingly digital economy (which favours a cashless society and demands innovation to keep up with users’ changing attitudes to payment services) for some time. Unlike cryptocurrencies such as Bitcoin, a CBDC would be a central digital currency, backed by the BoE and benefitting from the public trust inherent in traditional paper money as a non-volatile and widely accepted means of exchange.

Chancellor’s plans to boost UK fintech and financial services

The Chancellor’s plans include the creation of a new FCA “scale box” and a Centre for Finance, Innovation and Technology (CFIT), as well as consultations on changes to the UK’s prospectus regime and Listing Rules as part of the Government’s implementation of the recommendations arising from Lord Hill’s UK Listing Review.

The FCA will enhance its regulatory sandbox by rolling out a “scale box” – a package of measures designed to support start-ups and growth-stage firms. As a sign of the Government’s commitment to delivering on the transition to Net Zero by 2050, HMT will also launch the second phase of its Digital Sandbox which will focus on helping firms to tackle issues related to sustainability and other climate change-related challenges. To this end, Rishi Sunak has also called for the establishment of the CFIT to work closely with regional and national fintech bodies to oversee the implementation of these initiatives. CFIT will also help to identify and address challenges within specific sub-sectors of the wider fintech industry.

For further information on the UK legal and regulatory reform agenda for fintechs and other issues affecting the fintech sector, please see our April 2021 Fintech briefing.

Clive Cunningham
Clive Cunningham
Partner
+44 20 7466 2278

Mark Staley
Mark Staley
Senior Associate
+44 20 7466 7621

Harry Millerchip
Harry Millerchip
Associate
+44 20 7466 6447