Bank of England Studying a Central Bank Digital Currency (CBDC) Anyone Can Own?
- Bank of England Studying a Central Bank Digital Currency (CBDC) Anyone Can Own?
The Bank of England (BOE) has been busy this year looking into an idea that we have actually written about here on this blog. A little over a year ago we published this article that talked about the idea of a new (possibly digital) global reserve currency that anyone could own and use. Even before that we talked about a company involved in a pilot project in the South Pacific that had developed a potential asset backed cryptocurrency that could be used by central banks and/or the IMF some day.
Now we have direct evidence that this idea is really being studied at the Bank of England. Earlier this year BOE Deputy Governor Ben Broadbent made a speech talking about the very kind of digital currency concept we had in mind. This month the BOE released a new research paper on the pros and cons of actually implementing a Central Bank Digital Currency. Both the speech and the research paper talk about it being possible to issue such a currency that you and I could own and not just banking entities. Below are some excerpts from the speech and paper on this followed by some added comments.
from the March 2016 speech by Ben Broadbent:
“Acting as a trusted third party is precisely what a central bank does. It performs that role only for one particular asset, central bank money (i.e. reserve deposits held largely by commercial banks at the central bank). But the function goes right to the heart of what central banks do and how they came about. And if a private-sector digital currency uses the technology to substitute for a third-party clearer, the central bank counterpart would do the opposite. The aim would be to widen access to the central bank’s balance sheet, beyond commercial banks. There’s no rigid correspondence here: in principle, one could introduce the technology and preserve the current arrangements, under which it is commercial banks that hold central bank deposits; it’s also possible to increase the number of counterparties without it. But the distributed ledger would probably make it easier to do so. That might mean adding only a narrow set of counterparties – perhaps a wide range of non-bank financial companies, say. It might mean something more dramatic: in the limiting case, everyone – including individuals – would be able to hold such balances.”
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