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31/07/24
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UK Apex Bank Proposes Program of Experiments for Wholesale CBDC
On July 30, the Bank of England (BOE) released a discussion paper on its approach to innovation in money and payments, proposing a programme of experiments towards testing the use cases, functionalities and prospective designs of both wholesale central bank digital currency (wCBDC) and synchronisation, as well as their relative merits.
Synchronisation is said to be a means through which the central bank money may interact with DLT platforms, and it involves Real-Time Gross Settlement (RTGS) system for transactions. The apex bank wants to adopt the synchronisation functionality to allow RTGS to facilitate safe settlement of digital asset transactions which could in part take place on DLT platforms.
They tested the functionality in collaboration with the BIS Innovation Hub London Centre by developing the Meridian prototype and it revealed how to orchestrate synchronised settlements in central bank money using housing transactions as an exploratory use case.
Another means through which the central bank money could interact with DLT platforms is using wCBDC technologies. The proposed programme of experiments would fall under three categories, including enabling Delivery versus Payment (DvP) securities transactions, enabling Payment versus Payment (PvP) foreign exchange transactions, and interoperability with global ledger initiatives.
“The experiments would ideally assess the relative operational risk and complexity involved in using the two technologies. In addition, an important step would be to assess how different types of financial asset can best be represented on a digital ledger,” reads the paper.
Hence, the BOE wants to initiate the program within the coming six months, thereby asking for feedback on the initial set of indicative use cases and potential use cases, which use case respondents would prioritise, as well as what the Bank’s overall experimentation priorities should be.
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