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The Bank of England (BoE) has become the latest central bank to partner with the Massachusetts Institute of Technology (MIT) to explore technical aspects of a central bank digital currency (CBDC).
The BoE will now collaborate with MIT on a 12-month research project that will explore potential technical challenges, trade-offs, opportunities and risks involved in designing a CBDC system.
“The collaboration forms part of the bank’s wider ‘research and exploration’ into CBDC, and will be focused on exploration and experimentation of potential technology approaches,” the central bank said.
The BoE maintains that the research is not intended to develop an operational CBDC as the decision on whether to introduce a CBDC in the UK has not yet been made.
Rather, “undertaking this type of technical research will help inform wider policy thinking around CBDC”, according to the BoE.
The BoE and HM Treasury are expected to launch a consultation on their assessment of whether to proceed to the "development" phase of a CBDC later this year. The consultation will be followed by a technical specification explaining the proposed conceptual architecture for any CBDC.
Should the authorities conclude that there is a case for a CBDC, the earliest date for its launch would be in the second half of the decade, according to the BoE.
The news comes hot on the heels of an announcement earlier this month that the Bank of Canada has also partnered with MIT to experiment with potential CBDC technology designs and approaches. This research will also last 12 months and will form part of the central bank’s wider research and development agenda on digital currencies and fintech.
Commenting on the Canadian partnership, MIT said its interest in the collaboration “stems from a desire to have, as much as possible, a hand in ensuring that neutral, responsible research is being done with this technology before any policy decisions are made. Building and implementing helps us understand the problems and challenges better, putting us in a unique position to help shape a CBDC that emphasises privacy, user agency, and financial equity.”
Separately, MIT is also working with the Federal Reserve Bank of Boston to experiment with the development and testing of a hypothetical CBDC platform.
The first phase of that project concluded in early February, with researchers publishing an open-source software called OpenCBDC, which is capable of handling 1.7m transactions per second, with the vast majority of transactions reaching settlement finality in under two seconds.
According to the Boston Fed, the solutions developed in this project, called Hamilton, offers significant technological flexibility that enables it to adjust the system to future policy direction.
The research team made the OpenCBDC software available on the software development platform GitHub for contributions.
