03.13.2020

BofE Paper: Central Bank Digital Currency

The Bank of England has published a discussion paper on central bank digital currency (CBDC).

An electronic form of central bank money

A Central Bank Digital Currency (CBDC) would be an electronic form of central bank money that could be used by households and businesses to make payments. The Bank has not yet made a decision on whether to introduce CBDC, and intends to engage widely with stakeholders on the benefits, risks and practicalities of doing so.

A CBDC would be an innovation in both the form of money provided to the public, and the infrastructure on which payments can be made.

If a CBDC were to be introduced in the UK, it would be denominated in pounds sterling, just like banknotes, so £10 of CBDC would always be worth the same as a £10 note.

Any CBDC would be introduced alongside – rather than replacing – cash and bank deposits.

A CBDC would not be a cryptoasset or cryptocurrency, nor necessarily based on the technology that powers them (Distributed Ledger Technology).

Money and payments are changing

We’re interested in CBDC because this is a period of significant change in money and payments.

Opportunities for the Bank’s objectives

CBDC could present a number of opportunities for the way that the Bank of England achieves its objectives of maintaining monetary and financial stability.

Designing a CBDC

The discussion paper outlines an illustrative model of CBDC designed to store value and enable UK payments by households and businesses.

What technology could CBDC use?

Choices around the technology used for CBDC are important as they would have a significant impact on the extent to which CBDC meets our overall objectives.

Future engagement

We welcome your views.

We want to begin a dialogue on the appropriate design of CBDC and an evaluation of whether the benefits of CBDC outweigh the risks.

Given the wide ranging implications of CBDC for the Bank’s objectives and the wider economy, any decision to introduce a CBDC would involve Her Majesty’s Government, with input from relevant regulatory authorities, Parliament and society more generally.

We invite feedback and ideas from the public, technology providers, the payments industry, financial institutions, academics and other central banks and public authorities, and have outlined our key questions for further research at the end of this paper.

See questions in Chapter 7.

Send your responses in to CBDC@bankofengland.co.uk by 12 June 2020.

Source: Bank of England

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