After many years where the debate over digital assets has been dominated by names such as Bitcoin, it is interesting to note the Bank of England's recent discussion paper on a central bank digital currency (CBDC) for sterling. This is a welcome start on a subject that is topical globally and could mean significant change for consumers, SMEs, larger corporates and the financial services industry more broadly. 

This early engagement paper will draw attention from financial services firms and other international regulatory authorities. It identifies a number of key questions and topics which the industry and regulatory authorities may soon begin to explore, some of which are set out below:

• What impact would a CBDC have on the payments landscape especially with the decline in the use of cash? How would the development fit with other initiatives that are already underway in the UK?
• How would a CBDC impact monetary and fiscal stability? Could it affect the pool of unconventional monetary policy tools available to the central bank? What potential impact could there be on the Bank's balance sheet and what could be used to mitigate any risks?
• How would the functionality and provision of a CBDC work? Are there viable business models for commercial banks to offer CBDC services? How can the right balance be struck between public and private sectors?
• What would the appropriate technology infrastructure be for a CBDC, a core ledger with API access for payment interface providers? How should it be designed in relation to other innovations such as digital identity, digital assets etc?

As a nascent topic it is important to note that there are many areas that will need to be investigated further. A CBDC represents a significant evolution of the complex landscape of finance with far reaching consequences across the economy.  We are sure many in the UK and globally will be watching with interest as the Bank of England continues to evolve its thinking in this area.

You can view the full paper by using this link:

https://www.bankofengland.co.uk/-/media/boe/files/paper/2020/central-bank-digital-currency-opportunities-challenges-and-design.pdf?la=en&hash=DFAD18646A77C00772AF1C5B18E63E71F68E4593