TL;DR
- After spending £24 million on research, the Bank of England is rethinking its digital pound plans due to strong public backlash and privacy concerns.
- Governor Andrew Bailey now favors tokenized bank deposits over a state-backed currency.
- At the same time, new regulations will limit bank exposure to cryptocurrencies and strengthen oversight of stablecoins, prioritizing private innovation over an official digital pound.
Once presented as an inevitable step forward for the “modern” UK’s monetary system, the digital pound now appears closer to the cutting-room floor than to everyday wallets. With more than 50,000 citizens voicing concerns about privacy and surveillance, and critics calling the project unnecessary, the Bank of England has begun to pivot. Instead of introducing a new central bank digital currency, officials are encouraging commercial banks to accelerate existing digital payment upgrades that would deliver many of the same advantages.
Governor Bailey has argued that transforming traditional deposits into tokenized forms could meet the demand for faster, secure payments without the risks associated with a state-issued digital currency. This position highlights the diminishing global enthusiasm for CBDCs. While the European Central Bank still pursues a digital euro, other major economies, including the United States and South Korea, have recently scaled back similar initiatives.
Privacy Concerns And Technical Barriers Erode Support
Many critics warn that a digital pound could threaten financial freedom and expose transactions to state surveillance. Former Bank economist Neil Record labeled the plan a costly mistake, pointing out that most people already enjoy safe, interest-bearing digital accounts through established banks.
Consultations also revealed fears that, in times of crisis, people might flock to digital pounds, draining commercial banks of deposits and undermining the broader financial sector. Lawmakers like Lord Forsyth see little reason to pour more taxpayer money into a concept with few clear benefits when proven payment solutions already exist.
Stablecoin Oversight Gains Momentum
While backing away from a digital pound, the Bank of England is ramping up efforts to regulate private digital money. By 2026, new Basel-based rules will cap crypto holdings for UK banks at 1% of assets to guard against volatility and market shocks.
Governor Bailey remains open to future CBDC discussions if technology or consumer habits change dramatically. For now, however, the UK appears more focused on modernizing existing financial infrastructure than reinventing money altogether. Pro-crypto voices see this shift as proof that decentralized assets and private payment innovation remain strong alternatives to centralized state projects that struggle to earn public trust.
