Bank of England Collaborates MIT for CBDC research

Bank of England and MIT form partnership on CDBCs

There is still no decision on a CDBC for the U.K

Countries across the world continue to adopt the CDBCs

On Friday, Bank of England(BoE)- the central bank of the United Kingdom, announced a partnership with the Media Lab’s Digital Currency Initiative(DCI) of the Massachusetts Institute of Technology for a research project on the CDBC technology; this is to last for 12 months and aims at investigating the potential problems, risks, and benefits associated with the electronic token system. 

Central Bank Digital Currencies(CBDCs), as the name indicates, are digital tokens created and distributed by a central bank. A CDBC reflects the same value as a country’s fiat currency and can serve as a medium of exchange, a unit of value, and the settlement of a debt. CDBCs are not cryptocurrencies despite their similarities. Unlike cryptocurrencies, CDBCs are centralized and subject to regulation by the parent central bank.

Bank of England remains undecided about a digital pound sterlings

The “Old Lady” as Bank of England is popularly known, stated this research does not indicate any plan to develop a digital pound. “This work is focused on exploratory technology research and is not intended to introduce an operational CBDC. No decision has been made on whether to introduce a CBDC in the UK, which would be a major national infrastructure project” read a statement from the Bank.

It is worth noting that the Bank of England started researching CBDCs in 2020. In fact, the banking institution released a discussion paper on CBDCs on March 12, 2021. BoE’s discussion paper drew a response out of MIT’s DCI- a discussion paper detailing how a CBDC would support the Bank’s goal of preserving financial and monetary stability. On April 19, 2021, the Bank and Her Majesty’s Treasury put up an investigative task force on the novel technology, and the most recent discussion paper was made public on Thursday.

While the debate of a digital pound rages in the United Kingdom, the House of Lords Economic Affairs Committee has applauded the idea of a Central Bank Digital Currency tipping it to be a better medium of exchange for international transactions. However, the committee also expressed concerns over the token’s stability and protection from online threats such as hackers.

As the world continues to evolve into a cashless economy, many nations have adopted this invention. So far, nine countries have developed a fully operational CBDC, the latest being the Federal Republic of Nigeria. The West African country launched its e-naira on October 25, 2021. Currently, there are 60 countries researching on CBDCs with many more expected to join the financial trend.