The taskforce, launched on Monday, will explore the objectives, use cases, opportunities, and risks of a potential digital currency.

Rishi Sunak, British finance minister, said the BoE and UK Treasury will work together to assess the benefits of a CBDC, at a time when cash payments are generally on the decline, partly as a result of the COVID-19 pandemic.

“We’re launching a new taskforce between the Treasury and the Bank of England to coordinate exploratory work on a potential CBDC,” Sunak told a financial technology (fintech) conference.

Our vision is for a more open, greener, and more technologically advanced financial services sector.

“And if we can capture the extraordinary potential of technology, we’ll cement the UK’s position as the world’s preeminent financial centre.”

BoE said if the new currency is eventually developed, it would be a new form of digital money for use by households and businesses and could also reduce financial stability risks.

One of the benefits of a digital currency would be as a backup to card payments if cash payments continue to drop in the years to come

Asides UK, other central banks are also looking at whether to set up digital versions of their own currencies.