The purpose of this Discussion Paper is to broaden the debate around new forms of digital money and to solicit views on the Bank’s emerging thoughts from a wide range of stakeholders. Throughout, new forms of digital money are assumed to be stable in value with a retail focus.
New Forms of Money
The BoE has fielded a discussion document about the new forms of money which describes two forms of money –
- Central Bank Reserves
- Commercial Bank Deposits
The purpose of the discussion paper is to address the emerging digital payments market which uses emerging stablecoins, and could use CBDCs.
New forms of money could be far cheaper to create, and enable much quicker growth.
A possible downside is the commercial banks could have less involvement in the economic and this could affect lending.
Another possible downside which follows is the BoE’s ability to impact the economy by adjusting interest rates.
Stablecoins have driven much of the emerging sector and the Treasury now advises the BoE should enforce the Banking Act 2009 against stablecoins.
What is not clear at all from the BoE paper is how that would be done. Most stablecoins are maintained outside of the UK, and the BoE would have no authority over such providers.
Additional to that, it is clear from numerous events and other autorities – outside the UK – do not agree with the UK’s intrepretation of standards and law (eg in the SEC case against Ripple – Ripple executives went to lengths to explain the UK support their position , contrary to the SEC’s take on the law).
This seems to be a fundamental point which is not addressed at all by the Document.