UK's digital pound still in design phase while EU accelerates digital euro plans

The UK's plans for a central bank digital currency remain in the design phase, with the Bank of England working alongside HM Treasury to develop the technological infrastructure for what could become known as the digital pound. Speaking to the House of Commons' Public Accounts Committee this week, deputy governor Dave Ramsden emphasized that the bank is focused on creating a robust platform that can support innovation while maintaining the "singleness of money" - the principle that all forms of money should be interchangeable at par value.

Ramsden told MPs that the UK is still evaluating whether to proceed with a retail CBDC, with a decision expected this year. "We've got to make a decision – I think this year – on our retail CBDC," he said, distinguishing between the concept of digital currency itself and the underlying infrastructure, or "rails," that would support it. The bank is also examining how stablecoins - digital assets pegged to specific currencies - might fit into the UK's digital currency ecosystem.

This cautious approach contrasts sharply with growing pressure on the European Union to accelerate its digital euro plans. In January, more than 60 economists wrote to the European Parliament urging swift action on creating a digital euro, warning that Europe's payment system is increasingly dominated by non-European corporations. "In 13 euro-area countries, basic retail payments now rely entirely on international card schemes – without any domestic alternative," the economists noted in their letter [PDF]. "This dependence on foreign (US) payment providers exposes European citizens, businesses, and governments to geopolitical leverage, foreign commercial interests, and systemic risks beyond Europe's control."

The EU's urgency versus UK deliberation

The European Central Bank has moved significantly further along in its CBDC development, with plans to issue the digital euro as early as 2029, assuming necessary legislation is adopted. This timeline reflects mounting concerns about Europe's payment sovereignty, particularly given recent geopolitical shifts and the growing influence of US-backed private digital currencies.

Ramsden acknowledged this divergence in progress, telling MPs that "the European Central Bank (ECB) had 'gone much further on retail CBDC – the digital euro – we're still at the design phase.'" The Bank of England's more measured approach stems partly from previous skepticism about the need for a retail CBDC. In January 2022, the House of Lords Economic Affairs Committee stated it was yet to "hear a convincing case for why the UK needs a retail CBDC."

However, the Bank of England and HM Treasury have since shifted their position. In February 2023, they indicated that the UK would "probably need a digital version of the pound at some point" and launched a consultation to explore the possibility. The consultation concluded that while it was "too early to commit to building the infrastructure for one," further preparatory work was justified.

Technical developments and policy considerations

In April 2025, the Bank of England demonstrated that an offline digital payment system could work, showing progress in the technical aspects of CBDC development. However, the bank is waiting to study policy choices before progressing further. This technical work focuses on ensuring that any digital currency maintains the "singleness of money" - a core principle that all forms of money, whether physical cash, commercial bank deposits, or digital currencies, should be interchangeable at par value.

The bank is also grappling with how to handle potential stablecoins pegged to sterling. Ramsden noted that "if a sterling stablecoin came along, as opposed to a digital pound, could we deal with that? Would that meet our standard of singleness of money, alongside commercial bank money or notes?" This question reflects the increasingly complex landscape of digital currencies, where private sector innovations may emerge before or alongside central bank initiatives.

Geopolitical implications

The contrasting approaches between the UK and EU highlight different strategic priorities. While the UK maintains a wait-and-see approach, the EU faces mounting pressure to act quickly to preserve its economic sovereignty. The economists' warning about dependence on US payment providers carries particular weight given recent geopolitical tensions and the potential for economic coercion through control of payment systems.

The development of CBDCs represents more than just technological innovation - it's increasingly viewed as a matter of national and regional economic security. As private digital currencies backed by US entities gain ground, both the UK and EU must decide how to balance innovation, financial stability, and sovereignty in their approach to digital currencies.

For now, the UK remains in the design phase, carefully considering its options while monitoring both domestic needs and international developments. The Bank of England's focus on building flexible infrastructure that can accommodate various forms of digital money - whether CBDCs, stablecoins, or other innovations - suggests a pragmatic approach that prioritizes adaptability over rushing to be first.

The path forward for both the UK and EU will likely depend on how successfully they can address the technical, policy, and geopolitical challenges that CBDCs present, while ensuring that any new digital currency strengthens rather than undermines their respective financial systems.