Consortium tests sterling-backed stablecoin for Bank of England

A group of private companies known as the Digital FMI Consortium will test cross-border payments using a sterling-backed stablecoin and provide its findings to the Bank of England.

The DFMI is the UK’s first private pilot to evaluate the potential for a digital currency ecosystem in the country. The pilot includes an evaluation of a sterling-backed stablecoin and a central bank digital currency (CBDC).

According to an press release on Wednesday, the pilot, called Project New Era, will start in October and will last one to two years. The project aims for a private/public partnership that will explore the challenges of implementing a regulated stablecoin together with a CBDC.

Seemingly in line with the UK’s desire to turn itself into a global digital asset hub, Project New Era will seek to strike a balance in which cryptocurrencies, especially stablecoins and CBDCs, can coexist harmoniously.

To that end, the DFMI is made up of financial institutions that include commercial banks, payment providers, telecommunications providers, and fintechs, along with representatives from the cryptocurrency industry.

Brunello Rosa, CEO and Head of Research at Rosa & Roubini Associates, one of the companies within the consortium, summarized the current global state of play regarding a future payment system:

“Currently, 105 countries (representing more than 95 percent of global GDP) are exploring avenues towards a CBDC, while 10 countries have now fully launched a digital currency. The market continues to develop at a tremendous pace, with the UK government announcing plans to make the UK a global crypto hub, the ECB recently stating that CBDCs could be the ‘holy grail’ of cross-border payments, and the Fed examining a digital dollar with increasing urgency.”

Alison Conway, Head of Strategic Development at Trust Payments, shared her view on how digital assets, and CBDCs in particular, can play a role in a new ecosystem:

Commerce is constantly changing and innovating. Against this backdrop, digital currencies and CBDCs in particular offer a unique opportunity to design a playbook that encourages interoperability while delivering tangible benefits to merchants and consumers alike. With global uncertainty and the demand for trust and transparency mounting, now is the time to build the platform and create the ecosystem that will shape the next generation of UK trade and the broader monetary system that underpins it.”

While this new initiative plans to explore exciting new world of digital payments, we hope that enough attention will be given to just how invasive a CBDC can be in the UK, given the many privacy concerns already in the public arena around such a movement.

Disclaimer: This article is for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial or other advice.

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