Central banks are actively exploring central bank digital currencies (CBDCs) by conducting research, proofs of concept and pilots. However, adoption of a CBDC can risk fragmenting both payments markets and retail deposits. In this paper, Barclays’ Lee Braine and Shreepad Shukla from the Chief Technology Office aim to provide a mitigation to this fragmentation risk by presenting an illustrative industry architecture which places CBDCs and commercial bank money on a similar footing.
They introduce the concept of ecosystems providing a common programmability layer that interfaces with the account systems at both commercial banks and the central bank. We focus on a potential United Kingdom (UK) CBDC, including industry ecosystems interfacing with commercial banks using Open Banking application programming interfaces (APIs).
The paper focuses on a potential UK CBDC and presents an illustrative industry architecture that:
- adopts and extends the Bank of England’s platform model for CBDC provision,
- aligns to the Bank of England’s currently-identified system characteristics and views on potential technology choices for CBDC infrastructure, and
- mitigates the risk of fragmentation in payments markets and retail deposits by introducing the concept of ecosystems that provide a common programmability layer across CBDC and commercial bank money.
Barclays is currently developing a prototype based on the illustrative industry architecture.