The Bank of England(BOE) is advancing towards the launch of the digital pound following Project Rosalind’s positive reinforcement. The project, conducted over the past year, revealed that the technology can support a “diverse range” of new money uses. The project was started last year and was managed by the UK institution in conjunction with the Bank for International Settlements, to identify the workings and benefits of a central bank digital currency(CBDC), particularly the digital pound.
Positive feedback received on the digital pound
According to a report published by the BIS, the first phase of the project found that a CBDC could fasten individual payments and make transactions easier. Firms could also introduce the latest financial products with the additional benefit of lower fraud rates using a “digital pound” CBDC. In addition, it brings about the concept of money “programmability,” allowing payments, for example, to settle based on the buyer’s satisfaction with the product.
Based on the findings, BOE’s CBDC, “Britcoin,” is advancing toward launch. The Bank has mentioned that it’s “likely” a CBDC like the digital pound will be necessary in the future. However, it has not decided on further progression with the unveiling of a CBDC until it has fully analyzed responses from an ongoing consultation set to be finalized by the end of this month. In addition, the bank would also need the UK Treasury to back the technology.
Gilbert Verdian, the CEO of blockchain technology provider Quant, mentioned earlier in the year that the UK money system was unsuitable in a digital society. Hence, the London-headquartered company has been working on developing a retail CBDC since a year ago.
Quant underlying blockchain infrastructure
The project’s first phase had eight big tech and banking participants test the CBDC using the Quant underlying blockchain infrastructure. Barclays Plc tested it on cash-on-delivery payments, whereby cash was released to the vendor once the products were received and in good condition. Mastercard also created a CBDC debit card, while Amazon UK introduced it for checking out. The Bank of Canada, BNY Mellon, UK fintech Revolut, and Worldline also experimented with the CBDC.
According to Verdian, the biggest result of the project was building a multi-party lock payment system. The system works so that the digital asset is secured and the vendor is aware the payment is in place and will arrive once goods or services are delivered to the consumer. He added that this aspect of conditional logic and smart money prevents fraud rather than protection. He further stated that the technology would see Britain as the “epicenter of the next generation of financial systems”, adding that the digital pound has an opportunity to be one of the preferred currencies due to its smart money logic.
Project Rosalind proved the maintenance of privacy with CBDCs
Meanwhile, critics are saying the technology is a way to give governments and central banks a worrying insight into user spending. Verdian has, however, shot these claims down, saying it is a mere misconception since Project Rosalind proved the maintenance of privacy with CBDCs.
Former BEO Governor, Lord Mervyn King, has compared CBDCs to the App Store and smartphones, whose capabilities prior to being available en masse were not known widely. Lord Mervyn believes CBDCs are currently at that point. As for Francesca Hopwood Road, head of BIS Innovation Hub London Center, she said that they believe that Rosalind will bring change in how organizations engage with retail CBDC systems.
Globally, some countries have already adopted CBDCs. Brazil recently closed its pilot program with financial institutions with the aim of launching a CBDC in 2024. In January 2023, China added e-CNY to its currency circulation calculations.
