Bank of England launches discussion paper on “ambitious agenda” for UK’s payments landscape
The Bank of England is seeking feedback on its “ambitious agenda” for the UK’s payments landscape through a newly published discussion paper.
BoE launches discussion paper on payments innovation
The paper seeks to identify the means necessary to strike a balance between the rapid pace of payment innovation against the central bank’s monetary and financial stability objectives.
With this, the central bank’s latest publication highlights several key focus points relating to the rate of innovation.
Chief among these are the financial stability risks posed by the continued detachment of financial markets from central bank money and the parallel rise of private forms of digital money, such as tokenised deposits and stablecoins.
The Bank of England has so far sought to mitigate these risks through the advent of the Digital Securities Sandbox, for which a consultation was launched in April.
The paper highlights how if central bank money was unable to interact with new technologies, “there could be a risk of settlement activity moving away from central bank money to private settlement assets that could interact with them”.
Elsewhere, the central bank also addresses its risk appetite for wholesale settlement in central bank money.
These risks tie in closely with its future roadmap for the real-time gross settlement service (RTGS), which is to introduce a range of new functionalities.
These include extended RTGS settlement hours and the installation of a synchronisation interface that would support connections to external ledgers and programmable platforms, as well as asset settlement in central bank money.
Central to this interaction with programmable platforms are wholesale central bank digital currency (wCBDC) technologies. However, the paper admits that “further work is required to consider the respective roles” of these innovations.
“We seek a payments landscape which maintains the singleness of money and promotes sustained innovation, with infrastructure and a wider ecosystem that is resilient and has sustainable governance and funding models,” the paper states.
The central bank is now seeking public feedback on a wide range of payment innovations.
Specific areas of feedback include the scalability of programmable platforms within wholesale financial markets, the pace of innovation in private money from a retail payments context, and the risk and benefits of using tokenised deposits and stablecoins for wholesale transactions, among other areas.
The public has been invited to submit their feedback on the paper, and has until 31 October 2024 to do so.
