On March 12, the Bank of England (BoE) published a discussion paper on central bank digital currency (CBDC), focussing on its opportunities, challenges and design (the Paper). In conjunction with publishing this Paper, the BoE updated its CBDC webpage.
In this Paper, the BoE sets out its initial thoughts on a CBDC in light of its understanding of the future of finance. The BoE notes that physical cash, such as banknotes, are being used less frequently as a form of payment, while FinTech firms are introducing new mechanisms of payment and forms of money. The Paper considers whether the BoE should innovate to provide a CBDC to the public as a complementary form of payment to banknotes.
A key feature of a CBDC is that is electronic money that could be made available to the general public and businesses allowing them to make payments and store value. The Paper discusses the application of CBDCs in this context. The Paper notes that this is not a conclusive CBDC approach, but rather a basis for further exploration of the opportunities and challenges it could pose for payments, the BoE’s objectives and the wider economy.
The BoE has not yet decided on whether to introduce a CBDC, and that was not the aim of the Paper. The BoE intended that the Paper would begin discussions on the design of a CBDC and provide a considered cost benefit analysis of their adoption. If a CBDC is adopted by the BoE in the future, the decision to do so would involve the government, Parliament and regulatory authorities, and engagement with society more generally.
The BoE is open to responses until June 12, 2020, and will be hosting a webinar on this Paper on April 7, 2020.