BoE Embarks on CBDC and DLT Experiments for Payment Systems
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The Bank of England (BoE) wants to test distributed ledger technology (DLT) and wholesale central bank digital currencies or CBDC (wCBDC). These experiments will map the dynamics of the payments landscape and evaluate the potential and challenges of financial technology innovations. Central Banks Explore Cryptocurrencies and DLT Possibilities The emergence of cryptocurrencies and DLTs has led to central banks worldwide exploring their possibilities. Some central banks work on projects with the Bank for International Settlements (BIS). For example, the BoE is participating in the BIS Project Agora, which involves testing the exchange of tokenized commercial bank deposits and central bank money on a single platform. Governor Andrew Bailey stressed the role of confidence in money and payments for monetary and financial stability. The role of the BoE has to change as innovation remains a key driver of a strong UK economy. One way of integrating the CB money with the DLT is through synchronization – moving assets from one platform to another with the cash part recorded on the RTGS ledger. BoE Focuses on Wholesale CBDC Innovations Wholesale CBDCs are central bank digital currencies designed for institutions. These tokens could improve engagement with programmable interfaces. The BoE’s discussion paper focuses on policy-relevant outcome-based experiments with wholesale central bank money innovations. The BoE will work with the Treasury, the Payments Systems Regulator, and the Financial Conduct Authority to achieve the objective of a single currency by making all the forms of money equivalent. In the discussion paper, the author proposes the following steps to keep this duality between stablecoins and tokenized deposits. BoE Tests wCBDC and Synchronization Mechanisms The BoE’s experiments will include both the wCBDC and synchronization mechanisms. The Bank of England wants to assess the strengths and weaknesses of the two methods because the Bank of England plays a significant role in ensuring monetary…
Filed under: News - @ July 31, 2024 6:42 am