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Bank of England to explore a potential Central Bank Digital Currency

232 points by tyho 5y ago

cblconfederate 5y ago
Central banks are going fintech. Now the global currency wars can begin
- sgt101 5y ago
  Well - they began in about 1914 when the UK got out of the gold standard. Very good essay by Adam Tooze about the recent shots fired. https://foreignpolicy.com/2021/04/01/janet-yellen-mario-draghi-italy-united-states-technocrats-capitalist-democracy/?utm_source=pocket-newtab-global-en-GB https://foreignpolicy.com/2021/04/01/janet-yellen-mario-drag...
  - the-dude 5y ago
    Thank you, enjoyed the read very much.
  - danlugo92 5y ago
    Paywalled.
the-dude 5y ago
A taskforce is being created. That's all folks.
- faffe 5y ago
  Indeed, you well sum up the article
- ur-whale 5y ago
  Design by committee, what could possibly go wrong.
  - ClumsyPilot 5y ago
    Governments cant just trust it to a single 'stable genious' and call it a day
  - corobo 5y ago
    In fairness Bitcoin wasn't designed by committee and it's up there with CFCs in how much of a detriment it is to the environment
    - StavrosK 5y ago
      Bitcoin uses energy. Energy is a detriment to the environment, but it doesn't have to be. The problem isn't the energy usage, the problem is that we're bad at generating energy without killing the planet.
      - the-dude 5y ago
        The planet will be fine. You are projecting.
      - corobo 5y ago
        Ok so turn the safe generators on then Until then I feel my point stands
- davidgerard 5y ago
  But don't forget: one of the things it's going to do is look for a ... use case!
- waterglassFull 5y ago
  We prefer the term "Do Group"
itsdsmurrell 5y ago
This is great... easier rails into hard money (crypto).
- Nursie 5y ago
  Just no. Hard money is not desirable. Whatever comes out of this "the country's money supply should be determined by some cryptobros" is not going to be the result.
  - casi18 5y ago
    I get the "anti-crypto-bro" sentiments, but Ive trusted the FOSS/linux communities for long enough to have open and auditable tech and clear decision making, it might not be perfect but it is a lot more transparent than my government. I'd pick the crypto-communities and thousands of people gaming them to design better mechanisms for the everyday people to use, than a few politicians and the banks that are bribing them.
    - RichEO 5y ago
      I think you might be over estimating the overlap between the FOSS/Linux community and the crytobro community - at least as it exists in 2021
      - casi18 5y ago
        I think HN repeatedly underestimates the overlap of these communities. FOSS ideology is critical in pretty much all crypto/defi projects.I can probably pick any dev in the space and they'll most likely be running linux. HN refuses to change its collective position it settled on a decade ago. It seems people here got stuck on some abstract projections of "crypto-capitalism-cruelty" and refuse to admit there might be something interesting going on. Where did the "move fast and break things" people, the "disrupt the institutions" people, and the hackers go? crypto. Or should we only be working on sass startups to reformat pdfs. is that what we're allowed to work on? everything else is a moral sin? Utterly Bizarre.
kasperni 5y ago
More info here [1], and a background discussion paper her [2]. [1] https://www.bankofengland.co.uk/research/digital-currencies https://www.bankofengland.co.uk/research/digital-currencies [2] https://www.bankofengland.co.uk/-/media/boe/files/paper/2020/central-bank-digital-currency-opportunities-challenges-and-design.pdf https://www.bankofengland.co.uk/-/media/boe/files/paper/2020...
codeulike 5y ago
They should make it work on the 'old money' system of penny, shilling and pound, with twelve pence to a shilling and twenty shillings to the pound, then use the abbreviation 'd' for pence, and then throw in farthings (quarter penny) and half-crowns (two shillings and six pence) because if there's one thing I've learnt about finance, its that the more confusing things are, the easier it is to make a profit.
- zelphirkalt 5y ago
  While in general quite confusing, I cannot help but notice, that they used to use better divisible numbers like 12, to go to the next bigger unit. I also read that Babylonians or whoever it was, used a system with base 60, even better divisible. I wonder how it would affect our daily lives, if we still had such better divisible numbers in use with money today. For example 60 cent make a euro or dollar or whatever. Of course then it might not be called "cent" any longer. In essence, perhaps not all ideas of such an old system were bad in principle.
  - isolli 5y ago
    My favorite theory explaining the emergence of base- 12 and 60 is counting on your fingers: count up to the 12 phalanges on one hand (using your thumb), then start over and keep track of dozens with the 5 fingers on the other hand.
  - marcus_holmes 5y ago
    My parents grew up with the "old money", and my father in particular always said that it was easier to work with because everything divided by 2,3 or 4 easily. His opinion was always that the new money was introduced to make computerisation easier. In other words, the benefit wasn't for humans (who prefer working in 12's), but for computers.
    - nosianu 5y ago
      That does not make sense to me, since computers "native" numbers are not binary and the layer on top would not care one bit if it converts the binary representation to whatever base. Not to mention that the wide-spread use of the decimal system among humans happened long before computers where even dreamed of. So those things point to the decimal system adoption having been made for humans and not for computers. Countries other than the UK had done that step (for currency) centuries before Britain too. Here is some background: "How Britain converted to decimal currency" -- https://www.bbc.com/news/business-12346083 https://www.bbc.com/news/business-12346083 Also, > the benefit wasn't for humans (who prefer working in 12's) I'm not sure what people you know, I don't know anyone who would prefer base 12. That seems like a very bold claim to me - I think I would like to see some evidence for it.
monkeydust 5y ago
Probably lends itself GNU Taylor which works with central authority. https://taler.net/en/index.html https://taler.net/en/index.html
- eointierney 5y ago
  Why is this not more widely deployed? It's been around a while, is compliant with a bunch of regulations, is from perhaps the world's best software "stable", and doesn't require idiotic amounts of energy to compute. Should we not not all run our own Taler servers?
canoebuilder 5y ago
Bitcoin, et al. seek to approximate a monetary system, to bootstrap a workable currency outside the traditional trappings of a centralized state. Being digital is not the point, it just makes the idea possible whether or not it works in practice. What exactly would a central bank “digital currency” bring to the table? Dollars, pounds, yen, are already digital.
- Nursie 5y ago
  The change here, from what I can tell, is that you could have consumers directly dealing with the central bank, holding accounts directly with it, cutting out the traditional retail banks. I'm not sure one way or another if that's a good idea, and I guess they aren't either, hence the forming a committee to investigate.
  - vishnugupta 5y ago
    Indeed, that's the biggest change I could think of. Another, minor but important, change is CBDC will completely eliminate physical cash. How will that pan out is to be seen. FWIW, China has been the farthest on this path to the extent that they are claiming they will do a 100% rollout by next year's Winter Olympics. This is a really interesting phase in this space.
  - gajotron 5y ago
    This process of cutting out traditional retail banks destroys liquidity, which the central bank knows it would probably have to offset through either becoming an explicit uncollateralised lender to banks or other monetary policy. They are likely to be very conservative about that.
- razius 5y ago
  Programmable money, they decide the rules on where, how, who and until when money can be spent. See chapter 6.4 here: https://www.bankofengland.co.uk/-/media/boe/files/paper/2020/central-bank-digital-currency-opportunities-challenges-and-design.pdf https://www.bankofengland.co.uk/-/media/boe/files/paper/2020...
- 5y ago
m1 5y ago
Super interesting talk on this at https://www.youtube.com/watch?v=EM7NB1_NtC4 https://www.youtube.com/watch?v=EM7NB1_NtC4
yur3i__ 5y ago
If this provides a solution for anonymised digital cash payments such that something like paypal or a bank transfer isn't necessary then i'm all for it.
- matheusmoreira 5y ago
  It's a central bank currecy issued by a nation state. It's unlikely that anonymity will be a feature.
KaiserPro 5y ago
I've not really understood the need for a "digital" pound, the pound is pretty digital already. I can already have an entirely digital bank account from at least three "challenger" banks. There are also now at least two business accounts that also entirely virtual. "Faster Payments" (customer bank transfers) are delivered in seconds. I can see a need for speeding up BACS, and reducing the price of CHAPS, but apart from that, there isn't much wrong with the pound. changing to having an open ledger(bitcoin style) isn't entirely great as a normal citizen. I don't really want my entire financial history to be picked over by advertisers, insurance companies, future employers, and spam/scam bots. A government isn't ever going to allow a normal citizen to have a anonymous payments system so I don't see them allowing a purely private and anonymous currency (ala-monero)
- xwolfi 5y ago
  A normal citizen is never gonna build a government that allows for anonymous payment systems. To often people speak of their government as completely abstract separated entity they can only submit to. But actually, they elect them and the government even follow them in their craziest follies, like, say, leaving the EU in the UK.
  - KaiserPro 5y ago
    > To often people speak of their government as completely abstract separated entity they can only submit to. it is a compromise. I don't want to live in anarchy (sorry, a libertarian world) because like extreme communism it has inherent flaws. Thus I submit to being ruled by the UK government, and actively vote in elections. However as its a compromise, no present party with a chance of winning power reflects my views, thus compromise. However to your main point. Anonymous easy payments are a vector for corruption, crime and general bad stuff. Sure there are good usecases for it, but mostly it'll be used to avoid tax.
    - jokethrowaway 5y ago
      I share your feelings on government but, after reading The Machinery of Freedom, I believe anarchy is worth a shot. I wonder if you would reconsider anarchy if there was a private system of entities providing government-like services and compete with each other. http://daviddfriedman.com/The_Machinery_of_Freedom_.pdf http://daviddfriedman.com/The_Machinery_of_Freedom_.pdf
ben30 5y ago
I think the value here isn't for consumers. It's having a central ledger that all of the main financial institutions use. No need to a move a % of your treasury reserves into the central bank each night. As the treasury department of Barclays for example, the central bank of england can see your liquidity buffers in real time, intraday.
lottin 5y ago
Not sure if direct electronic payments without intermediaries are all that useful. How are disputes going to be dealt with?
- MrMan 5y ago
  might makes right
- olalonde 5y ago
  Same as with cash payments or bank transfers today.
  - bun_at_work 5y ago
    What? The bank is the intermediary, right? For cash payments, is there good dispute handling? It's terrible, right? And most people who are robbed of their cash don't get it back, right?
aseerdbnarng 5y ago
What I believe the BOE is exploring is for each citizen to have an account with the BOE and the potential for the types of money that can be used in this parallel banking system. If we think of the financial system as plumbing, the central bank has direct pipes to banks but rarely to citizens. This is not usually a problem except when you need to do a big emergency stimulus push not having direct pipes to individuals means stimulus takes a long time to reach individuals (if it does at all). Even countries like the USA and UK had a challenge rolling out stimulus, so this is a mechanism to bypass traditional banking system in a crisis. Thats just the banking aspect, the interesting stuff is what you can do with the type of money issued. For example you can build inflation into the currency, to encourage the user to spend it. Or it can be tied to carbon credits as a way to encourage the purchase of environmentally friendly products. I am not saying this is what is going to happen, only that a digital currency directly issued by a central bank has the potential to be used in ways that is not readily possible right now.
- dools 5y ago
  The government doesn’t need everyone to have an account at the central bank in order to deposit money directly into their account. QE doesn’t stimulate the economy because bonds and reserves are functionally identical as far as bank capital requirements are concerned and reducing interest rate payments is deflationary.
  - aseerdbnarng 5y ago
    >The government doesn’t need everyone to have an account at the central bank in order to deposit money directly into their account. It does make it a lot easier. The US, for example, was issuing stimulus cheques because there was no way to directly transfer funds into bank accounts. The UK had the same problem, so they pushed their stimulus through employers. In both cases there was no direct pipe from the central bank to the intended recipient which is what I think is most of what BoE is trying to achieve. QE was the equivalent of using a waterfall to put out a candle. If you squint hard enough and get drunk on supply-side wonk-juice you could convince yourself it worked.
ObserverNeutral 5y ago
Who asked for this and where is the proof-of-ask? Also how can we make money from this?
globular-toast 5y ago
Government run digital money is the second best thing after decentralised digital money. Since the latter has not panned out as originally hoped, I support this second best approach.
BayesianDice 5y ago
There's lots of speculation here on what the Bank of England means by a central bank digital currency (CBDC) - people may be interested in the more concrete indications of what the Bank is / has been considering in a discussion paper which they published in March 2020: https://www.bankofengland.co.uk/-/media/boe/files/paper/2020/central-bank-digital-currency-opportunities-challenges-and-design.pdf?la=en&hash=DFAD18646A77C00772AF1C5B18E63E71F68E4593 https://www.bankofengland.co.uk/-/media/boe/files/paper/2020... The chapter on Technology Design states "Although CBDC is often associated with Distributed Ledger Technology (DLT — see Box 5), we do not presume CBDC must be built using DLT. Most existing payment systems are run on centralised technology stacks, and there is no reason CBDC could not also be built this way. However, DLT includes a number of potentially highly useful innovations, which can potentially be adopted independently of each other, allowing us to use the specific features of DLT which are most relevant and appropriate, without using DLT in its entirety." The paper also discusses the risk-free nature of the currency (compared to deposits held in a commercial bank where consumers in principle face credit risk if the bank defaults), resilience, and innovation. And it notes the interesting related questions of whether the CBDC would be interest-bearing, and to what extent consumers switching from commercial bank deposits to the CBDC would impact the commercial banking model (using deposits to fund lending).
- anm89 5y ago
  This is a key point. CBDCs have no intrinsic overlap with blockchain or crypto currencies. You could use a blockchain as part or all of the strategy for storing the data of your currency but you could do it without using these concepts at all. The more likely scenario here is that blockchains will not be used here. People should not confuse CBDCs with crypto. They are unrelated concepts.
  - danialtz 5y ago
    Amen. One does need a decentralized ledger for CBDC, high performance databases are quite acceptable, as there is no problem of lack of trust in a permissined model (no systematic bad actor). If you listen to Moser (and Chaum) video, he even states somewhere the unnecessity of DLTs for retail CBDCs. There are still some benefits but not worth to bet against the blockchain trilemma in these early stages.
rahimnathwani 5y ago
A bunch of comments in this thread claim that the pound is already digital, because you can send and receive pounds using a mobile app or online banking. But these transactions simply transfer obligations (debts) denominated in pounds between parties. They are not operations on actual pounds (i.e. on the central bank currency). You can trade 'pork bellies futures' quickly, and using nothing but a computer. But no one claims pork bellies are digital. When people trade, they're effectively trading IOUs, and not the actual bellies. A Central Bank Digital Currency would allow individuals to hold and transfer 'real' pounds (M0). Currently, only banks and selected other financial institutions can open accounts at the Bank of England. If you think you (an individual) can currently hold digital pounds, just because you have a bank account, consider this question. If you have 200k GBP in your bank account, and the bank goes bust, will you still be able to withdraw 200k GBP?
- suprfsat 5y ago
  Are British bank accounts not FDIC insured?
  - JumpCrisscross 5y ago
    > Are British bank accounts not FDIC insured? No. They are protected by the FSCS [1]. [1] https://en.wikipedia.org/wiki/Financial_Services_Compensation_Scheme https://en.wikipedia.org/wiki/Financial_Services_Compensatio...
  - rahimnathwani 5y ago
    Even if UK banks were covered by FDIC (which covers only US banks), the limit is $250k (less the 200k GBP I mentioned in my comment). The UK equivalent is capped at 170k GBP per account-holder: https://www.moneysavingexpert.com/savings/safe-savings/ https://www.moneysavingexpert.com/savings/safe-savings/
  - nexuist 5y ago
    Does the FDIC cover any other country's banks than the US?
blondie9x 5y ago
As more governments research and implement digital currencies doesn’t it hurt the general use case for crypto?
gm3dmo 5y ago
We've seen this kind of technology in search of a problem before in the UK and specifically with cryptocurrency: http://www.open.ac.uk/research/news/blockchain-startup-called-govcoin http://www.open.ac.uk/research/news/blockchain-startup-calle... This was sold as: our bitcoin/govcoin solution will keep people from being evicted from their homes because banks take 3 days to pay. Which if you spent 15 minutes looking into you would find out it's a total nonsense.
ohples 5y ago
I'm curious what is the situation in the UK with regards to the universalness of banking services, especially electronic ones. . In the US we have a large portion of the population that is "unbanked" for a varaity of reasons and have to rely on sketchy and scam financial services like those prepaid debit and credit cards and "check cashing places".
- rahimnathwani 5y ago
  Approximately any adult in the UK can open a fee-free bank account: https://www.moneyadviceservice.org.uk/en/articles/basic-bank-accounts/amp https://www.moneyadviceservice.org.uk/en/articles/basic-bank...
Cypher 5y ago
boomers chasing the next big thing
calltrak 5y ago
The "Bank of England" is a private bank and no one knows who the real shareholders are. Just like the Federal Reserve in the United States. The federal reserve is not federal and has no reserves. Private central banks print money out of nothing and lend them to governments at interest. The governments then tax the hell out of you to pay back these privately owned banks. Think you are free and living in a democracy. Think again!
akdav 5y ago
https://link.medium.com/bhC5SA8JAfb https://link.medium.com/bhC5SA8JAfb
neilwilson 5y ago
Central bank currencies, at least in the U.K. where our payment system is near instant anyway, is little more than a retail bank account at the Bank of England. A game the Bank of England got out of back in 2008. (People who worked at the BOE used to have the perk of a BOE bank account with the fabled 10-xx-xx sort code) Funny how these things go in cycles.
Kiers88 5y ago
I don't see how digital currency based on bitcoin architecture will be attractive to banks AT ALL. AT ALL. You can't "double spend" bitcoin, which is the sine qua non of BANKING! You can't "create" bitcoin into existence to make a loan as banking does all the time. What is this canard of CBDC....i don't understand what their game is!
- Kiers88 5y ago
  what was so wrong with my comment? already voted down? by who and for what? are we supposed to "rah-rah" the tech being pushed here without thinking?
teslaberry 5y ago
I'm sure they'll have the city of london, BVI, grand cayman, jersey isle of man and the rest of the crimibanks using the 'digital' blabla in notime. gold is going to 2800$ an ounce before the next truly major crisis arrives, and political rules are enforced against ownership. we're not too far off. should be 2-3 years, late summer 2024ish. before then a major major market selloff and money printing cycle will occur again.
teslaberry 5y ago
gold is going to 2800$ before a digital pound happens. city of london, isle of man, jersey, bvi, grand cayman. where do you think they're going to bitcoin?

232 points by tyho 5y ago

cblconfederate 5y ago

Central banks are going fintech. Now the global currency wars can begin

sgt101 5y ago
Well - they began in about 1914 when the UK got out of the gold standard. Very good essay by Adam Tooze about the recent shots fired. https://foreignpolicy.com/2021/04/01/janet-yellen-mario-draghi-italy-united-states-technocrats-capitalist-democracy/?utm_source=pocket-newtab-global-en-GB https://foreignpolicy.com/2021/04/01/janet-yellen-mario-drag...
- the-dude 5y ago
  Thank you, enjoyed the read very much.
- danlugo92 5y ago
  Paywalled.

the-dude 5y ago

A taskforce is being created. That's all folks.

faffe 5y ago
Indeed, you well sum up the article
ur-whale 5y ago
Design by committee, what could possibly go wrong.
- ClumsyPilot 5y ago
  Governments cant just trust it to a single 'stable genious' and call it a day
- corobo 5y ago
  In fairness Bitcoin wasn't designed by committee and it's up there with CFCs in how much of a detriment it is to the environment
  - StavrosK 5y ago
    Bitcoin uses energy. Energy is a detriment to the environment, but it doesn't have to be. The problem isn't the energy usage, the problem is that we're bad at generating energy without killing the planet.
    - the-dude 5y ago
      The planet will be fine. You are projecting.
    - corobo 5y ago
      Ok so turn the safe generators on then Until then I feel my point stands
davidgerard 5y ago
But don't forget: one of the things it's going to do is look for a ... use case!
waterglassFull 5y ago
We prefer the term "Do Group"

itsdsmurrell 5y ago

This is great... easier rails into hard money (crypto).

Nursie 5y ago
Just no. Hard money is not desirable. Whatever comes out of this "the country's money supply should be determined by some cryptobros" is not going to be the result.
- casi18 5y ago
  I get the "anti-crypto-bro" sentiments, but Ive trusted the FOSS/linux communities for long enough to have open and auditable tech and clear decision making, it might not be perfect but it is a lot more transparent than my government. I'd pick the crypto-communities and thousands of people gaming them to design better mechanisms for the everyday people to use, than a few politicians and the banks that are bribing them.
  - RichEO 5y ago
    I think you might be over estimating the overlap between the FOSS/Linux community and the crytobro community - at least as it exists in 2021
    - casi18 5y ago
      I think HN repeatedly underestimates the overlap of these communities. FOSS ideology is critical in pretty much all crypto/defi projects.I can probably pick any dev in the space and they'll most likely be running linux. HN refuses to change its collective position it settled on a decade ago. It seems people here got stuck on some abstract projections of "crypto-capitalism-cruelty" and refuse to admit there might be something interesting going on. Where did the "move fast and break things" people, the "disrupt the institutions" people, and the hackers go? crypto. Or should we only be working on sass startups to reformat pdfs. is that what we're allowed to work on? everything else is a moral sin? Utterly Bizarre.

kasperni 5y ago

More info here [1], and a background discussion paper her [2]. [1] https://www.bankofengland.co.uk/research/digital-currencies https://www.bankofengland.co.uk/research/digital-currencies [2] https://www.bankofengland.co.uk/-/media/boe/files/paper/2020/central-bank-digital-currency-opportunities-challenges-and-design.pdf https://www.bankofengland.co.uk/-/media/boe/files/paper/2020...

codeulike 5y ago

They should make it work on the 'old money' system of penny, shilling and pound, with twelve pence to a shilling and twenty shillings to the pound, then use the abbreviation 'd' for pence, and then throw in farthings (quarter penny) and half-crowns (two shillings and six pence) because if there's one thing I've learnt about finance, its that the more confusing things are, the easier it is to make a profit.

zelphirkalt 5y ago
While in general quite confusing, I cannot help but notice, that they used to use better divisible numbers like 12, to go to the next bigger unit. I also read that Babylonians or whoever it was, used a system with base 60, even better divisible. I wonder how it would affect our daily lives, if we still had such better divisible numbers in use with money today. For example 60 cent make a euro or dollar or whatever. Of course then it might not be called "cent" any longer. In essence, perhaps not all ideas of such an old system were bad in principle.
- isolli 5y ago
  My favorite theory explaining the emergence of base- 12 and 60 is counting on your fingers: count up to the 12 phalanges on one hand (using your thumb), then start over and keep track of dozens with the 5 fingers on the other hand.
- marcus_holmes 5y ago
  My parents grew up with the "old money", and my father in particular always said that it was easier to work with because everything divided by 2,3 or 4 easily. His opinion was always that the new money was introduced to make computerisation easier. In other words, the benefit wasn't for humans (who prefer working in 12's), but for computers.
  - nosianu 5y ago
    That does not make sense to me, since computers "native" numbers are not binary and the layer on top would not care one bit if it converts the binary representation to whatever base. Not to mention that the wide-spread use of the decimal system among humans happened long before computers where even dreamed of. So those things point to the decimal system adoption having been made for humans and not for computers. Countries other than the UK had done that step (for currency) centuries before Britain too. Here is some background: "How Britain converted to decimal currency" -- https://www.bbc.com/news/business-12346083 https://www.bbc.com/news/business-12346083 Also, > the benefit wasn't for humans (who prefer working in 12's) I'm not sure what people you know, I don't know anyone who would prefer base 12. That seems like a very bold claim to me - I think I would like to see some evidence for it.

monkeydust 5y ago

Probably lends itself GNU Taylor which works with central authority. https://taler.net/en/index.html https://taler.net/en/index.html

eointierney 5y ago
Why is this not more widely deployed? It's been around a while, is compliant with a bunch of regulations, is from perhaps the world's best software "stable", and doesn't require idiotic amounts of energy to compute. Should we not not all run our own Taler servers?

canoebuilder 5y ago

Bitcoin, et al. seek to approximate a monetary system, to bootstrap a workable currency outside the traditional trappings of a centralized state. Being digital is not the point, it just makes the idea possible whether or not it works in practice. What exactly would a central bank “digital currency” bring to the table? Dollars, pounds, yen, are already digital.

Nursie 5y ago
The change here, from what I can tell, is that you could have consumers directly dealing with the central bank, holding accounts directly with it, cutting out the traditional retail banks. I'm not sure one way or another if that's a good idea, and I guess they aren't either, hence the forming a committee to investigate.
- vishnugupta 5y ago
  Indeed, that's the biggest change I could think of. Another, minor but important, change is CBDC will completely eliminate physical cash. How will that pan out is to be seen. FWIW, China has been the farthest on this path to the extent that they are claiming they will do a 100% rollout by next year's Winter Olympics. This is a really interesting phase in this space.
- gajotron 5y ago
  This process of cutting out traditional retail banks destroys liquidity, which the central bank knows it would probably have to offset through either becoming an explicit uncollateralised lender to banks or other monetary policy. They are likely to be very conservative about that.
razius 5y ago
Programmable money, they decide the rules on where, how, who and until when money can be spent. See chapter 6.4 here: https://www.bankofengland.co.uk/-/media/boe/files/paper/2020/central-bank-digital-currency-opportunities-challenges-and-design.pdf https://www.bankofengland.co.uk/-/media/boe/files/paper/2020...
5y ago

m1 5y ago

Super interesting talk on this at https://www.youtube.com/watch?v=EM7NB1_NtC4 https://www.youtube.com/watch?v=EM7NB1_NtC4

yur3i__ 5y ago

If this provides a solution for anonymised digital cash payments such that something like paypal or a bank transfer isn't necessary then i'm all for it.

matheusmoreira 5y ago
It's a central bank currecy issued by a nation state. It's unlikely that anonymity will be a feature.

KaiserPro 5y ago

I've not really understood the need for a "digital" pound, the pound is pretty digital already. I can already have an entirely digital bank account from at least three "challenger" banks. There are also now at least two business accounts that also entirely virtual. "Faster Payments" (customer bank transfers) are delivered in seconds. I can see a need for speeding up BACS, and reducing the price of CHAPS, but apart from that, there isn't much wrong with the pound. changing to having an open ledger(bitcoin style) isn't entirely great as a normal citizen. I don't really want my entire financial history to be picked over by advertisers, insurance companies, future employers, and spam/scam bots. A government isn't ever going to allow a normal citizen to have a anonymous payments system so I don't see them allowing a purely private and anonymous currency (ala-monero)

xwolfi 5y ago
A normal citizen is never gonna build a government that allows for anonymous payment systems. To often people speak of their government as completely abstract separated entity they can only submit to. But actually, they elect them and the government even follow them in their craziest follies, like, say, leaving the EU in the UK.
- KaiserPro 5y ago
  > To often people speak of their government as completely abstract separated entity they can only submit to. it is a compromise. I don't want to live in anarchy (sorry, a libertarian world) because like extreme communism it has inherent flaws. Thus I submit to being ruled by the UK government, and actively vote in elections. However as its a compromise, no present party with a chance of winning power reflects my views, thus compromise. However to your main point. Anonymous easy payments are a vector for corruption, crime and general bad stuff. Sure there are good usecases for it, but mostly it'll be used to avoid tax.
  - jokethrowaway 5y ago
    I share your feelings on government but, after reading The Machinery of Freedom, I believe anarchy is worth a shot. I wonder if you would reconsider anarchy if there was a private system of entities providing government-like services and compete with each other. http://daviddfriedman.com/The_Machinery_of_Freedom_.pdf http://daviddfriedman.com/The_Machinery_of_Freedom_.pdf

ben30 5y ago

I think the value here isn't for consumers. It's having a central ledger that all of the main financial institutions use. No need to a move a % of your treasury reserves into the central bank each night. As the treasury department of Barclays for example, the central bank of england can see your liquidity buffers in real time, intraday.

lottin 5y ago

Not sure if direct electronic payments without intermediaries are all that useful. How are disputes going to be dealt with?

MrMan 5y ago
might makes right
olalonde 5y ago
Same as with cash payments or bank transfers today.
- bun_at_work 5y ago
  What? The bank is the intermediary, right? For cash payments, is there good dispute handling? It's terrible, right? And most people who are robbed of their cash don't get it back, right?

aseerdbnarng 5y ago

What I believe the BOE is exploring is for each citizen to have an account with the BOE and the potential for the types of money that can be used in this parallel banking system. If we think of the financial system as plumbing, the central bank has direct pipes to banks but rarely to citizens. This is not usually a problem except when you need to do a big emergency stimulus push not having direct pipes to individuals means stimulus takes a long time to reach individuals (if it does at all). Even countries like the USA and UK had a challenge rolling out stimulus, so this is a mechanism to bypass traditional banking system in a crisis. Thats just the banking aspect, the interesting stuff is what you can do with the type of money issued. For example you can build inflation into the currency, to encourage the user to spend it. Or it can be tied to carbon credits as a way to encourage the purchase of environmentally friendly products. I am not saying this is what is going to happen, only that a digital currency directly issued by a central bank has the potential to be used in ways that is not readily possible right now.

dools 5y ago
The government doesn’t need everyone to have an account at the central bank in order to deposit money directly into their account. QE doesn’t stimulate the economy because bonds and reserves are functionally identical as far as bank capital requirements are concerned and reducing interest rate payments is deflationary.
- aseerdbnarng 5y ago
  >The government doesn’t need everyone to have an account at the central bank in order to deposit money directly into their account. It does make it a lot easier. The US, for example, was issuing stimulus cheques because there was no way to directly transfer funds into bank accounts. The UK had the same problem, so they pushed their stimulus through employers. In both cases there was no direct pipe from the central bank to the intended recipient which is what I think is most of what BoE is trying to achieve. QE was the equivalent of using a waterfall to put out a candle. If you squint hard enough and get drunk on supply-side wonk-juice you could convince yourself it worked.

ObserverNeutral 5y ago

Who asked for this and where is the proof-of-ask? Also how can we make money from this?

globular-toast 5y ago

Government run digital money is the second best thing after decentralised digital money. Since the latter has not panned out as originally hoped, I support this second best approach.

BayesianDice 5y ago

There's lots of speculation here on what the Bank of England means by a central bank digital currency (CBDC) - people may be interested in the more concrete indications of what the Bank is / has been considering in a discussion paper which they published in March 2020: https://www.bankofengland.co.uk/-/media/boe/files/paper/2020/central-bank-digital-currency-opportunities-challenges-and-design.pdf?la=en&hash=DFAD18646A77C00772AF1C5B18E63E71F68E4593 https://www.bankofengland.co.uk/-/media/boe/files/paper/2020... The chapter on Technology Design states "Although CBDC is often associated with Distributed Ledger Technology (DLT — see Box 5), we do not presume CBDC must be built using DLT. Most existing payment systems are run on centralised technology stacks, and there is no reason CBDC could not also be built this way. However, DLT includes a number of potentially highly useful innovations, which can potentially be adopted independently of each other, allowing us to use the specific features of DLT which are most relevant and appropriate, without using DLT in its entirety." The paper also discusses the risk-free nature of the currency (compared to deposits held in a commercial bank where consumers in principle face credit risk if the bank defaults), resilience, and innovation. And it notes the interesting related questions of whether the CBDC would be interest-bearing, and to what extent consumers switching from commercial bank deposits to the CBDC would impact the commercial banking model (using deposits to fund lending).

anm89 5y ago
This is a key point. CBDCs have no intrinsic overlap with blockchain or crypto currencies. You could use a blockchain as part or all of the strategy for storing the data of your currency but you could do it without using these concepts at all. The more likely scenario here is that blockchains will not be used here. People should not confuse CBDCs with crypto. They are unrelated concepts.
- danialtz 5y ago
  Amen. One does need a decentralized ledger for CBDC, high performance databases are quite acceptable, as there is no problem of lack of trust in a permissined model (no systematic bad actor). If you listen to Moser (and Chaum) video, he even states somewhere the unnecessity of DLTs for retail CBDCs. There are still some benefits but not worth to bet against the blockchain trilemma in these early stages.

rahimnathwani 5y ago

A bunch of comments in this thread claim that the pound is already digital, because you can send and receive pounds using a mobile app or online banking. But these transactions simply transfer obligations (debts) denominated in pounds between parties. They are not operations on actual pounds (i.e. on the central bank currency). You can trade 'pork bellies futures' quickly, and using nothing but a computer. But no one claims pork bellies are digital. When people trade, they're effectively trading IOUs, and not the actual bellies. A Central Bank Digital Currency would allow individuals to hold and transfer 'real' pounds (M0). Currently, only banks and selected other financial institutions can open accounts at the Bank of England. If you think you (an individual) can currently hold digital pounds, just because you have a bank account, consider this question. If you have 200k GBP in your bank account, and the bank goes bust, will you still be able to withdraw 200k GBP?

suprfsat 5y ago
Are British bank accounts not FDIC insured?
- JumpCrisscross 5y ago
  > Are British bank accounts not FDIC insured? No. They are protected by the FSCS [1]. [1] https://en.wikipedia.org/wiki/Financial_Services_Compensation_Scheme https://en.wikipedia.org/wiki/Financial_Services_Compensatio...
- rahimnathwani 5y ago
  Even if UK banks were covered by FDIC (which covers only US banks), the limit is $250k (less the 200k GBP I mentioned in my comment). The UK equivalent is capped at 170k GBP per account-holder: https://www.moneysavingexpert.com/savings/safe-savings/ https://www.moneysavingexpert.com/savings/safe-savings/
- nexuist 5y ago
  Does the FDIC cover any other country's banks than the US?

blondie9x 5y ago

As more governments research and implement digital currencies doesn’t it hurt the general use case for crypto?

gm3dmo 5y ago

We've seen this kind of technology in search of a problem before in the UK and specifically with cryptocurrency: http://www.open.ac.uk/research/news/blockchain-startup-called-govcoin http://www.open.ac.uk/research/news/blockchain-startup-calle... This was sold as: our bitcoin/govcoin solution will keep people from being evicted from their homes because banks take 3 days to pay. Which if you spent 15 minutes looking into you would find out it's a total nonsense.

ohples 5y ago

I'm curious what is the situation in the UK with regards to the universalness of banking services, especially electronic ones. . In the US we have a large portion of the population that is "unbanked" for a varaity of reasons and have to rely on sketchy and scam financial services like those prepaid debit and credit cards and "check cashing places".

rahimnathwani 5y ago
Approximately any adult in the UK can open a fee-free bank account: https://www.moneyadviceservice.org.uk/en/articles/basic-bank-accounts/amp https://www.moneyadviceservice.org.uk/en/articles/basic-bank...

Cypher 5y ago

boomers chasing the next big thing

calltrak 5y ago

The "Bank of England" is a private bank and no one knows who the real shareholders are. Just like the Federal Reserve in the United States. The federal reserve is not federal and has no reserves. Private central banks print money out of nothing and lend them to governments at interest. The governments then tax the hell out of you to pay back these privately owned banks. Think you are free and living in a democracy. Think again!

akdav 5y ago

https://link.medium.com/bhC5SA8JAfb https://link.medium.com/bhC5SA8JAfb

neilwilson 5y ago

Central bank currencies, at least in the U.K. where our payment system is near instant anyway, is little more than a retail bank account at the Bank of England. A game the Bank of England got out of back in 2008. (People who worked at the BOE used to have the perk of a BOE bank account with the fabled 10-xx-xx sort code) Funny how these things go in cycles.

Kiers88 5y ago

I don't see how digital currency based on bitcoin architecture will be attractive to banks AT ALL. AT ALL. You can't "double spend" bitcoin, which is the sine qua non of BANKING! You can't "create" bitcoin into existence to make a loan as banking does all the time. What is this canard of CBDC....i don't understand what their game is!

Kiers88 5y ago
what was so wrong with my comment? already voted down? by who and for what? are we supposed to "rah-rah" the tech being pushed here without thinking?

teslaberry 5y ago

I'm sure they'll have the city of london, BVI, grand cayman, jersey isle of man and the rest of the crimibanks using the 'digital' blabla in notime. gold is going to 2800$ an ounce before the next truly major crisis arrives, and political rules are enforced against ownership. we're not too far off. should be 2-3 years, late summer 2024ish. before then a major major market selloff and money printing cycle will occur again.

teslaberry 5y ago

gold is going to 2800$ before a digital pound happens. city of london, isle of man, jersey, bvi, grand cayman. where do you think they're going to bitcoin?