The Bank of England (BoE), in collaboration with the Bank for International Settlements (BIS), has recently concluded a comprehensive analysis centered on the feasibility of retail central bank digital currency (CBDC) transactions. This endeavor, fondly christened “Project Rosalind,” delves into how a global and adaptable application programming interface (API) layer could serve as a conduit between the central bank and private sector infrastructures, ultimately enabling retail CBDC transactions.

Project Rosalind: Exploring the CBDC Landscape

Project Rosalind, a remarkable milestone in the BoE’s pursuit of a retail CBDC, delineates crucial design facets for a prospective digital pound. It dives into peer-to-peer transfers, retail payments for products and services, and small-scale business transactions.

Retail CBDCs’ importance is underscored in the study as their acceptance among U.K. policymakers has been quite lukewarm to date. The focus is predominantly directed towards wholesale CBDCs, tailor-made for high-value transactions between banks and large corporations but not intended for ordinary citizens.

A Retail CBDC: For Wholesalers or Retailers?

Earlier in the year, Sir Jon Cunliffe, the Bank of England’s Deputy Governor for Financial Stability, indicated that any digital pound’s first application would likely be wholesale.

However, as countries worldwide are at differing stages of conducting their individual retail CBDC examinations and pilot programs, the Bank of England‘s enthusiasm towards a digital pound remains uncertain. One notable example is the Central Bank of Thailand, which has initiated the trial phase of its “digital baht” retail payments with a select consumer and business group.

The Call for a Digital Pound: Deciphering the Need

Despite some BoE officials exhibiting keen interest, a broad agreement on the need for a digital pound remains elusive. The BoE’s responsibility extends to studying the potential impacts of introducing this novel technology and exploring various design alternatives. Nevertheless, the final verdict rests with the parliament.

Last year, the House of Lords Economic Affairs Committee published a provocative report: “Central Bank Digital Currencies: A Solution in Search of a Problem?”. The title alludes to a skeptical stance, raising doubts over the necessity of a digital pound and scrutinizing the merits of CBDCs against the U.K.’s existing payment and settlement frameworks.

The Road Ahead: Understanding the Risks and Rewards

The parliamentary hesitancy is contrasted by Cunliffe’s recent assertion that the U.K. is “likely” to require a CBDC, even estimating the chances of a digital pound materializing at 70%. However, he clarified that any move towards introducing a new digital currency could take several years.

In addition to the CBDC’s potential benefits, the House of Lords’ report also sheds light on associated risks, highlighting possible state surveillance of individual spending habits, financial instability, an undesired augmentation in central bank power lacking adequate scrutiny, and a single point of failure for the U.K.’s payment system.

None of the information on this website is investment or financial advice and does not necessarily reflect the views of CryptoMode or the author. CryptoMode is not responsible for any financial losses sustained by acting on information provided on this website by its authors or clients. Always conduct your research before making financial commitments, especially with third-party reviews, presales, and other opportunities.