The Bank of England has published the minutes of its recent Central Bank Digital Currencies (CBDC) Engagement Forum meeting, discussing CBDC use cases, ways to mitigate against digital, financial and socio-economic exclusion, and the co-existence of CBDCs and other forms of money.
Key discussion points arising from the meeting include:
- Use cases: The creation of a basic but extensible core platform that allowed the private sector to innovate on top of it was largely supported, enabling others to come up with value propositions that would ultimately shape and accommodate the use cases. The idea being that a flexible and extensible platform would allow innovators to identify and develop potential use cases and promote competition by reducing barriers to market entry. However, the private sector needed clarity around the policy and technical parameters that will be put in place for CBDC in order to start identifying potential use cases and commercial opportunities. With this in mind, the Bank of England noted its interest in organising workshops, hackathons or sprints involving private sector innovators to explore CBDC more practically.
- Inclusion: The topic of inclusion (digital, financial, socio-economic etc.) was also introduced and it was noted that building a CBDC in line with the Treasury’s financial inclusion objectives meant promoting access to useful and affordable financial products and services, whatever a person’s background or income. Presentations focused on how to design a CBDC to best accommodate for all types of inclusion. There were concerns that some long-term drivers of exclusion might not be addressed by CBDC, and simultaneously that some other drivers might be addressed by existing payments solutions rather than necessitating a CBDC. There were further concerns that as a CBDC would not address some of the issues relating to tangibility or digital literacy and skills, these could be worsened by a CBDC. It was noted that a range of design questions would need to be solved to ensure that financial inclusion and other exclusion challenges are effectively factored into CBDC’s design.
- Co-existence: There was a discussion regarding co-existence, and outlining requirements for it as well as potential benefits and challenges. The group looked at how a CBDC could fit into the current UK payments landscape, how it might interact with other forms of money and the different ways this might be achieved, considering the relevant trade-offs and risks.
While the CBDC Engagement Forum’s meeting demonstrates that continued positive steps are being taken to assess the CBDC use-case in the UK, the points raised act as a reminder of the significant challenges in the development and future operation of a CBDC in the UK. The next meeting is scheduled for May 2022.