BoE published a discussion paper that focuses on the appropriate design of a central bank digital currency (CBDC) and an evaluation of whether the benefits of CBDC outweigh the risks. The discussion paper outlines an illustrative model of CBDC designed to store value and enable UK payments by households and businesses. BoE has outlined the key questions for further research at the end of this paper and requested feedback by June 12, 2020. BoE invites feedback and ideas from the public, technology providers, the payments industry, financial institutions, academics, and other central banks and public authorities.
BoE has not yet made a decision on whether to introduce CBDC and this discussion paper is part of that process. The paper is intended to be the basis for further research and dialog between BoE and the payments industry, technology providers, payments users, financial institutions, academics, other central banks, and public authorities. Anyone with an interest in these fundamental issues is encouraged to respond to BoE on the potential benefits, risks, and practicality of CBDC. The paper highlights that CBDC could present a number of opportunities for the way BoE achieves its objectives of maintaining monetary and financial stability. CBDC would also introduce important policy challenges and risks that need to be carefully considered and managed. The paper outlines an illustrative platform model of CBDC, designed to enable households and businesses to make payments and store value.
Choices around technology would have a major impact on the extent to which CBDC meets the overall objectives. Although CBDC is often associated with Distributed Ledger Technology (DLT), it is not presumed that any CBDC must be built using DLT and that there is no inherent reason it could not be built using more conventional centralized technology. However, DLT does include some potentially useful innovations, which may be helpful when considering the design of CBDC. Given the wide‑ranging implications of CBDC for the BoE objectives and the wider economy, any eventual decision to introduce a CBDC would involve Her Majesty’s government, Parliament, and regulatory authorities, in addition to engagement with society more generally.
Keywords: Europe, UK, Banking, CBDC, Digital Currencies, Fintech, Distributed Ledger Technology, Regtech, Blockchain, BoE
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