The Bank of England published responses to its March 2020 Discussion Paper on central bank digitial currency (CBDC). While views on opportunities, risks and design choices associated with CBDC of course varied among respondents, there were some areas of significant agreement where a large majority expressed a similar view.
From these, the Bank of England has identified five core principles from the responses. These principles will be given particular regard in the Bank’s future exploration around CBDC:
- financial inclusion should be a prominent consideration in the design of any CBDC
- a competitive CBDC ecosystem with a diverse set of participants will support innovation and offer the best chance to deliver the benefits of CBDC
- in assessing the case for CBDC, due recognition should be given to the value of other payments innovations, and their ability to deliver the benefits the BoE seeks
- CBDC should seek to protect users’ privacy
- while CBDC should “do no harm” to the BoE’s ability to deliver monetary and financial stability, opportunities to better meet policy objectives should also be considered in CBDC exploration
Respondents also identified areas where CBDC could contribute to unconventional monetary policy. The most frequently given examples were: implementing negative interest rates; direct distributions of newly issued CBDC to citizens; implementation of quantitative easing.
BoE will progress its CBDC exploration through several initiatives:
- A joint taskforce with HM Treasury to ensure a strategic and coordinated approach to CBDC exploration by UK authorities, in line with their statutory objectives.
- An engagement forum will engage senior stakeholders on the practical challenges of designing, implementing and operating a CBDC. This will include stakeholders across industry, academia and civil society.
- A technology forum to gather input on all technology aspects of CBDC from technical specialists.
The BoE said in a statement: “The decision on whether to proceed with a CBDC is a profound one given the many public policy issues it raises. The Bank is committed to openness and transparency in its exploration of CBDC, and looks forward to continued dialogue with all stakeholders as we progress our work.”