On 30 July 2024, the Bank of England (BoE) published a discussion paper (DP) on its approach to innovation in money and payments. The DP asks for responses on “the next step in a wide-ranging conversation on how to deliver an ambitious agenda for the UK payments landscape”.
In the DP, the BoE explains how rapid innovations in payments can impact on its monetary and financial stability objectives, bringing both opportunities and risks. It sets out the BoE’s response to these innovations to date (including renewal of its Real Time Gross Settlement (RTGS) service), as well as how its response will evolve going forward, to enable innovation to take place in a safe way.
The BoE outlines its proposed approach in relation to:
- Wholesale settlement in central bank money – the BoE flags the financial stability risks of financial markets moving away from using central bank money and explains that its approach is to preserve the role of central bank money as an anchor for confidence in the financial system.
- Exploring innovations in wholesale central bank money – to preserve the role of central bank money, the BoE proposes to explore technological innovations to the systems it operates, including enhanced functionality for the renewed RTGS system, and a programme of experiments which would also cover wholesale central bank digital currency (CBDC).
- The retail payments landscape – the BoE flags the importance of ensuring UK households and businesses can make payments with ease, speed and confidence. It warns that meeting these retail payments objectives will require clear and renewed leadership by the UK authorities in this space, and it plans to work closely with HM Treasury, the Financial Conduct Authority and the Payment Systems Regulator to achieve this.
The deadline for responses to the DP is 31 October 2024.