Britain is said to adopt a “digital pound“, in response to the challenge posed by cryptocurrencies, such as bitcoin.
“We are launching a new working group between the Treasury and the Bank of England to coordinate the exploratory work on a possible digital central bank currency (CBDC),” said Finance Minister Rishi Sunak.
“At the same time, we will create a new financial market infrastructure – sandbox, for companies that innovate with technologies such as distributed universal technologies”, he added.
The BoE said that it and the British government have not yet decided whether to introduce a CBDC in the UK and that they will work closely with stakeholders on the benefits, risks and practical applications.
Any digital currency would be designed to coexist with physical cash and existing bank deposits, instead of replacing them, the British central bank said.
The task force will monitor developments abroad to ensure the UK remains at the forefront of global innovation in digital currencies, he added. Last week, the European Central Bank said it was studying an electronic form of cash to fill banknotes and coins, but any circulation is still several years away.