The UK government is pushing the Bank of England (BoE) to prioritize innovation in digital payments and money. This includes exploring new tokenization technology, which could allow for more efficient embedding of payments into the digital economy. Examples include automatic payments upon online delivery and faster, cheaper settlement in wholesale transactions between financial institutions, along with greater automation of back-office processes.
The BoE, in collaboration with the Treasury, Financial Conduct Authority, and Payment Systems Regulator, is working to modernize the UK's payments landscape. While acknowledging progress, the call is for greater innovation from banks, particularly in interbank payment rails. The BoE is also conducting exploratory work on a retail central bank digital currency (CBDC) as the use of physical cash declines.
The central bank is further undertaking a program of experimentation with wholesale CBDC technologies to ensure the UK's global payments infrastructure remains at the technological forefront. This involves linking with similar initiatives from other central banks. The overarching goal is to foster a robust and dynamic UK economy through advanced payment systems and infrastructure. The BoE has already proposed new regimes for tokenized securities and allowing stablecoins for real-world payments, emphasizing the importance of trust in both payment systems and money.
