Bank of England effectively halts issuance of a digital pound.
CBDC-related discussions face setbacks in both the U.S. and Korea.
Analysts warn premature CBDC adoption could worsen dysfunction in financial markets.

The Bank of England is reportedly considering halting plans to introduce a central bank digital currency (CBDC), also known as the digital pound. Rather than relying on centrally issued CBDCs or stablecoins, the bank is exploring a framework to digitize commercial bank deposits. The shift reflects a broader trend among major economies—including the United States and Korea—where governments are pausing CBDC discussions in favor of developing alternative approaches.

Bank of England Turns Away from CBDC

According to industry sources and reports from outlets including CryptoRank on the 27th (local time), the Bank of England is now re-evaluating its public-facing digital pound initiative. Bank of England Governor Andrew Bailey recently stated during a parliamentary hearing, “If commercial banks succeed in driving payment innovation, it will become even harder to justify the need for a Britcoin (digital pound).” His remarks signaled a clear shift toward supporting innovation led by the private banking sector over a centrally controlled CBDC model.

Since 2021, the Bank of England has invested £24 million (approximately $31 million) in research and development of the digital pound. However, the project remains behind many of its international peers in terms of technical progress. Public opinion also appears unfavorable. A recent consultation on the digital pound received more than 50,000 responses, many of which expressed concern about potential privacy violations and government overreach. Misinformation and conspiracy theories have further fueled public distrust surrounding the initiative.

Despite the scaling back of CBDC plans, the Bank of England is unlikely to lend significant support to private digital currencies such as stablecoins. Governor Bailey has consistently expressed skepticism toward them, stating that stablecoins could trigger capital flight from the banking system and undermine credit supply. Instead, he has indicated a preference for tokenizing traditional bank deposits as a more secure and reliable path forward.

Major Economies Seek CBDC Alternatives

The Bank of England's policy pivot reflects a broader global trend of pulling back from central bank digital currency (CBDC) development. Earlier this year, U.S. President Donald Trump signed an executive order halting the Federal Reserve's efforts to explore CBDC issuance. The U.S. Congress also passed the "Anti-CBDC Surveillance State Act," reinforcing this policy stance. The U.S. government has since shifted its focus to stablecoins—digital currencies pegged to fiat currencies such as the U.S. dollar—as a more viable alternative. Efforts to stimulate the stablecoin market are now being pursued through legislation like the Guiding and Establishing National Innovation for United States Stablecoins (GENIUS) Act.

South Korea is also scaling back its CBDC ambitions. On June 26, the Bank of Korea officially notified participating banks of its decision to pause the second phase of CBDC pilot testing. The central bank cited regulatory uncertainty as the reason for the suspension, stating, “It remains unclear how CBDCs, stablecoins, and deposit tokens will coexist, so we are considering delaying the pilot project until legislative discussions on a won-pegged stablecoin are concluded.” Seven commercial banks that took part in the first pilot invested approximately $25 million in total but signaled they are unable to commit additional funds going forward.

Within Korea, skepticism about digital currency adoption is growing. Industry voices argue that both CBDCs and stablecoins are ill-suited to the country's current financial environment. One market analyst commented, “CBDCs are unlikely to succeed due to Korea’s real-name system, which limits user demand, and stablecoins may struggle because there is limited international demand for the won.” The analyst added, “Given the won’s relatively weak global profile, pushing out a won-denominated stablecoin could end up being ignored by the market entirely.”

Why Is CBDC Falling Out of Favor?

The growing skepticism surrounding central bank digital currencies (CBDCs) also stems from concerns about their potential side effects. Because CBDCs are essentially digital representations of central bank liabilities, they could quickly become a widely accepted medium of exchange if implemented. The core issue lies in the fact that CBDCs, like fiat currencies, are not backed by tangible assets. This raises fears that CBDCs could repeat the historical pitfalls associated with unbacked fiat money.

After the collapse of the Bretton Woods system in 1972, which had partially tied global currencies to gold, nations worldwide transitioned to a fiat system. This shift led to rapid depreciation in currency values across the board, with very few countries able to preserve even half of their original purchasing power. Excessive issuance of unbacked currency has historically triggered severe economic crises—such as the 1997 Asian financial crisis and the 2008 global financial meltdown sparked by the U.S. subprime mortgage collapse.

There are also mounting concerns over the potential for CBDCs to enable surveillance states. Because CBDCs would be issued and managed by central banks, critics warn that such a system could become excessively centralized and authoritarian. A financial industry source noted, “Given that digital currencies leave a complete record of all transactions, fears are growing that governments could exploit CBDCs to monitor and control their citizens.” The source added, “It would essentially give the government a window into the private financial lives of every individual.”