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On June 7, the Bank of England (BOE) published a summary of responses to its 2020 paper on Central Bank Digital Currency (CBDC) and a discussion paper on new forms of digital money.


The 2020 Discussion paper on CBDC invited input on thirty five questions focused on four themes -- impact on payments, impact on monetary and financial stability, functionality and provision, and technology considerations. The summary responses highlighted different considerations including:


Payment impacts

  • CBDC's potential to provide additional resilience to the payment landscape by promoting payment diversity and competition: The extent of the benefits would depend on the design of the CBDC and the comparative openness and ease of entry of new participants.

  • CBDC's potential to enable innovation, to support a digital economy and to promote financial inclusion.

  • However, existing and emerging payment initiatives may already address the proposed benefits of a CBDC, challenging the additional value and net benefits of a CBDC initiative.

  • Balancing diverse and competing principles would be difficult in practice, requiring optimisation of trade-offs. Among those discussed are speed, efficiency, stability, competitiveness, innovation, extensibility, consumer and data protection, privacy, user trust, transparency, and financial inclusion.

Monetary and financial stability impacts

  • Risks to banks' funding through disintermediation of banking system

  • Remuneration of a CBDC

  • CBDC's potential to influence monetary stability and policy transmission

  • Macroeconomic benefits of CBDC's role in a more efficient payment system

  • Overall, the opportunities and risks of a CBDC would depend on the level and nature of demand for this type of currency

Functionality and provision

  • Public-private approach to delivering CBDC

  • Multiple range of business models possible

  • Requirement for financial and digital inclusion

  • Safeguarding privacy while dealing with financing crime

Technology approaches

  • Centralised vs decentralised approach

  • Token vs account based

  • Offline payments

  • Programmable payments

  • Flexibility, extensibility and interoperability of the CBDC design to provide a reliable and resilient service that would factor in future technological developments including new payment services, the emergence of the 'Internet of Things', artificial intelligence and machine learning, and advances in quantum computing.

The BOE will continue to assess and explore a CBDC, working with UK authorities, stakeholders across industry, academia and civil society, and technical specialists.


In the recently published discussion paper on new forms of digital money, the BOE raised different questions on five themes -- role of money in the economy, public policy objectives, illustrative scenario, implications for macroeconomic stability and the regulatory environment.


The Discussion Paper focuses on new forms of digital money, including stablecoins, that have significant potential to be systemic, the term 'systemic' is yet to be defined as outlined in the paper. The paper also focuses on the implications that adoption of private stablecoins could have on monetary policy.


They are accepting feedback from all stakeholders by 7 September 2021.

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