The Bank of England has released a 57 page document outlining their perceived merits and risks of issuing their own central bank digital currency (CBDC) and asking the general public for feedback.
The discussion paper, titled Central Bank Digital Currency – Opportunities, Challenges and Design, follows previous statements from bank officials indicating their intent to stay relevant in the fourth industrial revolution by adapting their Real Time Gross Settlement (RTGS) system to be compatible with blockchain and distributed ledger technology (DLT).
Future of Money
In the past, the Bank of England have been surprisingly candid about the intrinsic value of fiat currencies and the former Governor, Mark Carney, has publicly indicated there is a need for all central banks to “…change the game” by introducing state digital currencies.
With “The Future of Money” as the cover tagline, the latest report goes further in depth than earlier Bank of England papers and is broken down into several sections to consider how to introduce a CBDC into the current economic landscape and “…support monetary and financial stability.”
One of the ways to achieve that goal is stated to be “Avoiding the risks of new forms of private money creation.” However, the paper goes on to suggest “The Bank is also committed to supporting wider innovation and improvements in payments.”
The authors of the paper believe that current cryptoassets that go by the name of stablecoins cannot generate the same safety and confidence that a CBDC could provide. This is said to be because of the nature of a stablecoin and the assets backing it which “…may be unable to provide stability of value and redeemability at par back into commercial or central bank money.
As such, the paper suggests a “CBDC may be able to provide better payment services, backed by risk-free central bank money, and reduce the demand for new privately issued money-like instruments.”
The Bank of England is inviting members of the public to respond to the paper by July 12th.
