The Bank of England (BOE) is in the design phase of work on a digital pound (DP). As part of this phase, it is conducting experiments and proofs of concept in collaboration with private- sector innovators and a range of stakeholders.
The BOE is now accepting applications to conduct hands-on experimentation to explore the feasibility of different DP use cases in a simulated environment.
Its goals include assessing the viability of potential business models for payment interface providers and external service Interface providers. It will also assess the requirements necessary for a DP to provide a platform for innovation.
The first phase will run for approximately three months, with the aim of demonstrating the capabilities of the ‘Digital Pound Lab’ before it is opened for wider use cases. This phase will focus on use cases defined by the Bank. Up to six firms will participate in this phase. The second phase, lasting about nine months, will allow up to 10 firms per month for three-month periods. It will focus on use cases defined by the participants.
In addition, the BOE has published a report about whether it is technically feasible to implement an offline payment functionality for a DP. The project confirmed the technical feasibility, although there are trade-offs, particularly around user experience and preventing double spending and counterfeiting, which make implementing it challenging.
It showed that there are several technology choices that could be made for offline payments today, but those are dependent on policy choices, such as risk appetite, product proposition and liability, which impact the options available for mitigating security risks.
