On 12 March 2020, the Bank of England (BoE) published a discussion paper on central bank digital currency (CBDC).
The BoE has not yet made a decision on whether to introduce CBDC, and intends to engage widely on the benefits, risks and practicalities of doing so. The discussion paper is part of that process. If a CBDC were introduced in the UK, the BoE states that it would be denominated in pounds sterling, so £10 of CBDC would be worth the same as a £10 banknote. Any CBDC would be introduced alongside – rather than replacing – cash and commercial bank deposits.
The discussion paper outlines an illustrative ‘platform’ model of CBDC designed to enable households and businesses to make payments and store value. This is not a blueprint for CBDC, nor does it approach a decision to introduce one. Instead, it is intended to illustrate the key issues as a basis for further discussion and exploration of the opportunities and challenges that CBDC could pose for payments, the BoE’s objectives for monetary and financial stability, and the wider economy.
The discussion paper also notes that choices around technology will have a major impact on the extent to which CBDC meets its overall objectives. Although CBDC is often associated with distributed ledger technology the BoE does not presume that any CBDC must be built using DLT, and there is no inherent reason it could not be built using more conventional centralised technology. However, the BoE does note that DLT does include some potentially useful innovations, which may be helpful when considering the design of CBDC.
The deadline for comments on the discussion paper is 12 June 2020.