The booming cryptocurrency industry is forcing national banks to look towards fiat-backed digital currencies as a way of regaining back control of the financial system.

Even as the outcry for central bank digital currencies (CBDCs) is becoming more and more pronounced, many world governments are gradually launching their own independent programs to meet this growing need.

In an official release by the Bank of England (BoE), the UK's apex bank said it would be collaborating with Her Majesty Treasury to launch a CBDC Task Force to look into the exploration of a CBDC program. The CBDC is to serve as a form of digital money issued by the BoE and meant for local use.

The CBDC or a digital pound would play a secondary role and be used along with cash and bank deposits. According to the BoE, they are not meant to replace the pounds but to augment it.

Even though this is the first time the UK has openly discussed the prospect of a state-sanctioned digital currency since releasing a paper in March 2020, the financial body said it has not yet made a definitive decision on whether CBDCs would help the economy.

Instead, it would receive feedback from stakeholders on the generic benefits, risks, and practicalities of creating a digital pound.

The BoE said the CBDC Task Force would aim to ensure that a strategic approach is adopted across all UK authorities involved in the program. Alongside, the newly formed unit would guide the evaluation of the design features a CBDC is expected to have for it to meet the government's requirements.

They would also be responsible for assessing the objectives, use cases, opportunities, and risks of a potential UK CBDC. Alongside, they would serve as a surveillance team to track CBDC development across the globe to make sure the UK is not left behind.

The Task Force would be led by Deputy Governor for Financial Stability at the Bank of England Jon Cunliffe and HM Treasury’s Director General of Financial Services Katherine Braddick.

The new body also comes with a CBDC Engagement Forum and a CBDC Technology Forum.

The CBDC Engagement Forum is burdened with engaging with senior stakeholders and gathering strategic inputs on the non-technology aspects of the CBDC. This forum would play a pivotal role in serving as an advisory body to the BoE and the HM Treasury, intimating to them the challenges inherent in designing, implementing, and operating a CBDC.

The Technology branch would channel its energies towards gathering input on the tech-related tools for a CBDC from experts in the blockchain industry. They would be focused on enlightening the bank on the inherent challenges of designing, implementing, and using a CBDC.

The apex bank says it would pick experts from various fields, including financial institutions, academia, infrastructure providers, fintech, and technology firms.

The BoE also said that it would be establishing a CBDC unit to lead the internal exploration of CBDCs. Cunliffe would oversee the activities of this unit.

CBDCs have become the talk of the town ever since crypto became mainstream following the global pandemic. Countries like the Bahamas, France, and China have been quite active in the space so far.

And with growing market demand for a faster and more efficient payment system separate from the conventional technologies available, more national banks are committing to a digital currency future.

The Bank of Japan (BoJ) is a recent addition to the CBDC program. In a report released by the island nation’s apex bank, they are launching a digital yen in March 2022. According to the release on April 5, its proof-of-concept (PoC) was already underway.

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