The Bank of England (BOE) and HM Treasury have announced the joint creation of a Central Bank Digital Currency (CBDC) Taskforce to study a potential UK CBDC.

Britain's finance minister Rishi Sunak told a financial industry conference: "We're launching a new taskforce between the Treasury and the Bank of England to coordinate exploratory work on a potential central bank digital currency (CBDC).

"Alongside this we will set up a new financial market infrastructure 'sandbox' for firms innovating with technologies like distributed ledger technologies," he went on to add.

A decision has not yet been reached by the BOE and the government on whether to launch a CBDC in the UK.

The central bank added that any potential digital currency would exist alongside traditional fiat currency and existing bank deposits, rather than replace them, Reuters reports.

The taskforce will monitor overseas developments to make sure that Britain remains at the helm of global innovation on cryptocurrencies.

The Bank of England’s work on a potential CBDC has so far been limited to a discussion paper that was published in March last year, Coindesk reports. Monday’s announcement is the first indication of a practical study taking place.

The Treasury has also announced how blockchain can bolster financial market infrastructure in a new sandbox, which will be delivered alongside the Bank of England and the Financial Conduct Authority (FCA).

China is leading the race to launch a CBDC, which may help authorities to develop financial systems, meet the threat from cryptocurrencies and accelerate domestic and global payments.