Digital Pound in Doubt as Bank of England Rethinks Launch

Despite years of exploration, the Bank is now said to be leaning away from building the digital pound, citing regulatory and economic complexities. According to Bloomberg, internal discussions have turned increasingly pessimistic, with some officials questioning whether the project offers clear advantages over private-sector upgrades to existing payment systems.

These discussions come well after the Bank entered a “design phase” in 2023 and published multiple design notes and progress reports outlining potential CBDC features, including a public‑private distribution infrastructure model.

Bank Governor Andrew Bailey has frequently voiced reservations about the project. In June, speaking at a conference in Kyiv, he said he was still “not convinced that we need to create new forms of money, such as central bank retail digital currency, to achieve” payment‑system goals. He reiterated this stance in February, stating publicly in London that there was still no compelling case for a digital pound beyond private‑sector tokenisation or stablecoins.

Bailey’s caution is echoed by recent remarks where he urged caution over banks issuing stablecoins and favoured tokenised deposits provided by regulated commercial banks, rather than launching a new CBDC. This near‑public distancing marks a clear shift from earlier optimism.

Following a 2023 consultation and a 2024 design‑phase kick-off, the Bank and HM Treasury published design notes and progress updates outlining a blueprint for the digital pound. Key proposals included a core ledger managed by the Bank, with third-party intermediaries offering wallets to individuals and businesses; a technology sandbox, the “Digital Pound Lab,” designed to test APIs, privacy, and operational resilience; and a forward plan involving stakeholder consultations, technology proof-of-concepts, and labouring through cost-benefit analysis to develop primary legislation for eventual implementation.

Despite these efforts, the Bank remained cautious: in January 2025 it stated no decision on launch would come before 2027 at the earliest, a date which now looks increasingly unlikely.

At the heart of the Bank’s indecision lies a key question: what distinct public-policy or consumer advantage does the digital pound offer beyond adjustments to existing systems? Bailey has argued that boosting innovation in retail banking through tokenised commercial bank deposits could be sufficient, without the complexity of issuing a CBDC. He also emphasised real-world needs like cross-border payments, fraud reduction, and smart-contract solutions, applications already being piloted by the private sector.

Independent commentators observe that while other countries like the EU are forging ahead with CBDCs, the UK has yet to identify a clear use case compelling enough to justify the expense, infrastructure overhaul, and legislative work.

The Digital Pound Lab has made progress, with ongoing trials continuing into 2025. These experiments are exploring API use cases, privacy safeguards, merchant functionality, and interoperability. The Bank has also engaged extensively with the fintech community, asking for insights, hosting forums, and setting up working groups.

Yet despite this robust blueprinting effort, the strategic impetus behind the project is weakening. Internal uncertainty about funding priorities, political economy, and return‑on‑investment are weighing heavily.

Officially pausing or shelving the digital pound project would not be simple. Parliament has yet to pass any primary legislation permitting a UK CBDC, and any future revival would require a renewed mandate, extensive consultation, and likely years of renewed planning. Instead, the Bank may slow innovation while banking on the private sector to mature digital tokenisation and stablecoin regulation. This would leave the retail CBDC option on ice, but maintain broader exploration of wholesale CBDCs for institutional use.

The contrasting global responses add pressure: the EU remains committed to launching a digital euro by decade’s end, while the US continues debating congress-backed “digital dollar” initiatives. Meanwhile, stablecoins are gaining traction in private and institutional finance. Bailey has positioned British policy to potentially align more with the US, downplaying a CBDC and advocating tokenised commercial money. Critics argue the UK risks ceding influence in shaping future digital monetary infrastructure.

The Bank of England’s move to reconsider or possibly pause its flagship digital pound project marks a significant turning point. After over two years of exploratory commitment, design-phase rigour, and innovation trials, the momentum behind the project now hinges on whether it can demonstrate a public‑interest edge over private-sector tokenised money.