UK Bank of England Opens Discussion on Central Bank Digital Currency Options

The Bank of England has published a Discussion Paper on central bank digital currency opportunities, challenges and design. The BoE is one of several banks exploring introducing a CBDC. The Discussion Paper describes a platform model of CBDC that demonstrates the issues raised by the concept of a CBDC, highlighting both the risks and opportunities. The BoE stresses that the model does not represent any decision by the BoE on the design of a CBDC and is merely intended to aid the overall discussion. Indeed, the BoE emphasizes that no decision has been made on whether to introduce a CBDC and that it would need to ensure that the benefits outweigh any risks. If a CBDC were to be introduced in the U.K. it would be denominated in pounds sterling and would exist alongside cash and commercial bank deposits.

The BoE notes that the introduction of a CBDC in the U.K. would involve risks and opportunities for monetary policy, financial stability and payments. The BoE is seeking input on the impact of the introduction of CBDC on these three areas as well as on the functionality and provision of a CBDC and the technology and infrastructure that would be required. Input on the questions posed in these areas should be submitted by June 12, 2020. On technology, the BoE states that distributed ledger technology is being explored as well as the use of conventional centralized technologies.

View the Discussion Paper.

View the BoE summary of the issues in the Discussion Paper.

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