Bank of England Introduces CBDC Illustrative Model
By Marko Vidrih on The Capital
The Bank of England, the central bank of Great Britain, released a document on the digital currency of the central bank (CBDC). A 57-page document describes an “illustrative model” of the CBDC.
“We are interested in the CBDC, which will bring significant changes in monetary policy and payments,” writes the Bank of England. “The use of banknotes, the Bank’s most accessible form of money, is declining, and the use of money issued by private individuals continues to grow.”
According to the Central Bank, CBDC can provide a number of opportunities, including a “more stable” payment system, and in the future become part of the new cross-border payment system.
But it will also create problems and risks for the stability of the financial system.
“If significant deposit balances move from banks to CBDC, this could have consequences for both the Bank of England balance sheets and commercial banks. This may affect the volume of loans provided by banks, and how the Bank implements monetary policy and maintains financial stability,” the Central Bank explains.
The Bank of England says the CBDC will be an innovation both in the form of money provided to the public and in the payment infrastructure through which payments can be made.
Although the central bank has not yet decided whether to introduce a CBDC, it said that if a digital currency is issued, it will be “denominated in pounds sterling, so a 10-pound sterling CBDC will always cost the same as a 10 bill pounds”.
“Any CBDC will be introduced along with cash and deposits in commercial banks, and will not replace them,” the bank concluded.
Mark Carney, Governor of the Bank of England, said:
“We need to carefully and timely consider these issues with the government. This document is intended to be the basis for further research and dialogue between the Bank and the payment industry, financial institutions, economists, other central banks and governments.”
“I urge anyone interested in these fundamental issues to provide their comments to the Bank on the potential benefits, risks and practicalities of CBDC,” said Carney.
The bank will accept comments until June 12, 2020.
Author: Marko Vidrih
Featured image credit: Picfair.
