The Bank of England has laid out its principles for guiding its work on a central bank digital currency (CBDC).
Speaking at the FS tech: The Future of FinTech Conference, Tom Mutton, director of fintech at the Bank of England, said following the Bank’s 2020 discussion paper on CBDC, research and engagement, it has identified five principles which will guide its CBDC work for the future.
These principles are: financial inclusion should be a prominent consideration in CBDC design; a competitive CBDC ecosystem with diverse participants will support innovation; due recognition should be given to other payments innovations and their ability to support the outcomes the Bank seeks; CBDC should seek to protect users’ privacy; and while CBDC should ‘do no harm’ to the Bank of England’s ability to deliver monetary and financial stability, opportunities to better meet its policy objectives should also be considered in CBDC exploration.
Mutton said the Bank will soon reveal more details on plans that Chancellor Rishi Sunak has previously announced.
During UK Fintech Week, Sunak announced a joint taskforce between the Bank and Treasury to coordinate the exploration of CBDC by the UK authorities.
He also said there will be a CBDC engagement forum for senior stakeholders on the practical challenges of designing, implementing and operating a CBDC and a CBDC technology forum to gather input on all technology aspects of CBDC from technical specialists.
Mutton said that the Bank is looking forward to announcing the members and sharing more information on the forums’ areas of focus “shortly”.
He added that the UK is a thought leader on CBDC but must also learn from likeminded countries.
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“While CBDC should ‘do no harm’ to the Bank of England’s ability to deliver monetary and financial stability, opportunities to better meet our policy objectives should also be considered in CBDC exploration,” said Mutton.
“Supporting payments innovation is a priority. So we will explore the case for CBDC with pace and purpose, but also with an open mind on whether one is needed.
“Those explorations will be guided by the principles I outlined, and we’ll continue to engage with a diverse group of stakeholders to gain their insights as we think about the very important question of CBDC.”
The Bank of England’s 2020 discussion paper on CBDC lists a range of potential uses, including that the centralised currency has the potential benefit of supporting a resilient payments landscape with more efficiency and innovation.
It also said CBDC could help avoid the risks of new forms of private money creation, improving the availability and usability of central bank money, addressing the consequences of a decline in cash and as a building block for better cross-border payments.