The Govt have issued a consultation on how to implement a Central Bank Digital Currency. I say, that it seems to make as much difference to what we do today as a fart in a hurricane. Have I got it wrong? Consumers, that’s you and me will still pay using a card or a phone and we will need to back it with money (i.e. stored labour), because I am sure that the Treasury is not planning to issue #CBDC loans to the likes of you and me! The rest of this article are my notes and links to sources that have helped me get to where I am. This is structured mainly on what I have found, and when I found it. As ever on this wiki, I might make an article of it. …

I link to the consultation above, but they also issued a press release with more supporting material including a technology paper. The technology page has an address to reply to. which I found hard to fine, I have written and asked for one but found the reply address later. I think my insights in the comment dated, 27th May 2023 should be submitted. There is a mail address on the tech paper landing page,

What the Bank think & plan

It seems to me that this is only different if the Central Bank issues accounts to consumers, which the bank is not proposing? Why would they do this? Although it seems they are planning to do this. The key difference is whether consumers or businesses have direct access to their accounts.

The paper’s talk about cash and bank (i.e. lender) made money. A CBDC would be intended to replace cash as the demand for it decreases, but I ask how does a CBDC replace a private sector bank account? It could be quite frightening for someone living on benefits, where the Govt is making payment and acts the banker, although it seems the Bank of England only plans to be a wholesale provider.

The EU blog article, says, “Central Bank Digital Currency (CBDC) is a new form of money that exists only in digital form. Instead of printing money, the central bank issues widely accessible digital coins so that digital transactions and transfers become simple.” But money in a bank account already has these properties.

The paper suggests that not having one inhibits innovation, but like accountancy, and medicine, I am not sure we want innovative financial services. The sources of innovation are suggested to be embedded finance (in-app e-commerce), blockchain (an expensive and useless technology storage platform), smart contracts (another exceptionally dangerous and opaque technology), atomic swaps ( i.e. knowing both legs of a trade have completed) and the improvements in cryptography hopefully leading to more secure identity verification.

Embedded finance is performed by private sector payment processors, atomic swaps are currently performed by escrow agents although this might be an application suitable for proof of stake block chain ledgers but then performance and cost becomes a problem; who aren’t going to use such a scheme to buy a coffee.

Why? By John Cunliffe of the Bank. Who says, “This private money i.e. bank deposits, is not a claim on the state or backed with the resources of the state. It is not covered by that familiar Bank of England promise to ‘pay the bearer’.” Does this mean that if one held one’s money with the Bank of England, that one needs no fear of the adequacy of the Financial Services Compensation scheme, although this only impacts people with more than £85,000

Here’s some more reading.

  1. What is a central bank digital currency? by the BoE
  2. A consultations; the digital pound. a new form of money for households & businesses on
  3. The digital pound technology working paper by the BoE, not really, more an organisational architectural options paper.
  4. I have found, the Minutes of the CBDC Technology Forum – November 2021, which hosts a presentation, Item 2 Models of CBDC Provision, both hosted at the BoE site. See below for my comments on the Swedish classifications. The BoE have selected the simplest solution, which the Swedes describe as Centralised with Intermediaries. It involves holding a ledger for all holders of the digital pound. It’s the reservation of work to the intermediaries which makes me ask if this is any more than a clearing system,

What Europe is doing

Some thoughts from Europe, Banks and Academia

  1. Central bank digital currency from the EU’s EDPS, European Data Protection Supervisor.
  2. Central bank digital currency, is it a good idea? by Jonathan Sanchez, published by the Bank of Philadelphia, not so much as a cost benefit analysis, more a model of what will happen if. Also assumes that the central bank will issue consumer bank accounts. It predicts that interest rates will rise, good for savers, not so much for mortgagees.
  3. An Illustrative Industry Architecture to Mitigate Potential Fragmentation across Central Bank Digital Currency and Commercial Bank Money, by Lee Braine, Shreepad Shukla, I think this talks about models.
  4. Deloitte on the topic, a preso entitled, “Are central bank digital currencies, the currency of tomorrow?
  5. The ECB, “Tiered CBDCs and the Financial System“.
  6. CBDCs: The Good, The Bad, And The Ugly, at crunchbase, by Reuben Jackson, a block chain consultant. 🤷

Sweden, one of the lowest cash using societies in Europe and a nation of 10½ million are trialling CBDC, the UN/ITU comments, mainly historical, but states they don’t intend to act as payment processors, the Rijks Bank publish this, an index/home page, and this, a technical report. , §3 of the technical report, is a very clear definition of the technical/architectural models available and the document has a bibliography. I have taken note of these documents,

The Swedish Paper outlines the design goals & potential architectures. One of the goals, and its first one for the Swedes is safety, i.e. that people can have a greater access to central bank backed money; it seems we like in fictional world where our money if in a bank, may disappear due to bank failure and that the banj note promise to pay the bearer is real.

The Swedish paper states, in the case where, intermediaries have a significant role and continue to service the consumer,

The payment service providers conduct the required ‘Know-your-customer’ (KYC), ‘Antimoney-laundering’ (AML) and ‘Counter-terrorist-financing’ (CTF) policies. However, due to the fact that the Riksbank has a direct contractual relationship to the end-user, it is not clear that the Riksbank can renounce responsibility on these issues – these legal aspects need to be investigated further.

I am unclear that this is work the bank wants to do, (it doesn’t, this is the central division of labour in their definition of the platform model).

While attending a BCS/BoE seminar, someone asked if it was just a giant oyster scheme and others pointed at China’s Octopus scheme as a potential model. They are basically, pre-payment cards, with the fulfilment being based on bank account deposits. TFL’s Oyster Card is another such scheme.

They i,,e, the bank talk of 5 nines availability and 30,000 TPS, while looking at 100,000 TPS. I am assured by people who know better than I that this is do-able. But i checked the page, whose most recent result by HPE is ~12,000, using TPC-E, which took me to a discussion on which benchmark was the more suitable. I also wonder what Oracle are doing today?

Back in the UK

The issue of bank failure is serious and in the UK the primary defence is not the Bank’s promise on the bank note, but the Financial Services Deposit Guarantee System., which is capped. The other goals, are competition, resilience, and privacy. The architectures vary depending on the central role of the Bank, and the role of what they call intermediaries; the central differentiator being whether the central bank will open consumer accounts. The Swedes recognise that they are bound by the Payment Services Directive (as is the UK unless the brain-dead REUL goes through).

I have discovered that the payments industry is regulated by the Payment Systems Regulator. This was officially created under the Financial Services (Banking Reform) Act 2013. I am a bit disappointed that their vision, rather than the baseline is,

Payment systems are accessible, reliable, secure and value for money.

There is an additional IT security standard applying to payment processors, the PCI DSS, which is comprehensive, rigorous and useful.

One of the things I ask myself, is the simplest level of solution just a Bank of England owned Open Banking bus, something which has had limited success. See also me on Open Banking on LinkedIn. (It’s more than this, it’s something I wrote before I fully understood the proposed division of labour between the Bank and what they call intermediaries and we call banks.)

I also found this in the Bank’s Technology paper, which is important, depending on the model adopted.

The Bank already provides wholesale digital central bank money through its real-time gross settlement system and has done so for the last 25 years.

If the proposal is merely that the Bank’s role in settlements is extended then its current role must be understood and factored into the plans.

Strangely, just after reaching out for help in thinking about it, I find, Central bank digital currencies: a solution in search of a problem? issued by the House of Lords. It’s sums up how I feel although some of the ideology of the CBDCs, I consider dangerous.

Lord Forsyth of Drumlean, Chair of the House of Lords Economic Affairs Committee, said:

“The introduction of a UK central bank digital currency would have far-reaching consequences for households, businesses, and the monetary system. We found the potential benefits of a digital pound, as set out by the Bank of England, to be overstated or achievable through less risky alternatives.
“We took evidence from a variety of witnesses and none of them were able to give us a compelling reason for why the UK needed a central bank digital currency. The concept seems to present a lot of risk for very little reward. We concluded that the idea was a solution in search of a problem.”

Lord Forsyth of Drumlean, Chair of the House of Lords Economic Affairs Committee

Project Rosalind

I was pointed in May 2022, to the BIS Project Rosalind. The Bank were quoting it as independent research, it would seem its not. It’s a ‘joint’ project. I found their publication page which lists some publications, those they see as a summary of the current state, and a list of publications retrieved from their Innovation Hub using a search.

About the Technology

Can it be done? 60m transactions/day? 50m bank accounts? The bank are talking about 30,000 to 100,00 transactions per second. My comment below, talks about the scale of solution needed and the necessary design architectural patterns required for 99.999% (five nines) availability.

Alternative thoughts

Other thoughts that occur: is this a step between regulation and nationalisation of deposit takers? To what extent is their view of money divorced from a common perception of it as a store of wealth and whether this role should rehabilitate [elements of] the labour theory of value.

I wonder also if it is the defacto nationalisation/monopoly of the settlement function, or even of the current account service providers.

It seems that Richard Barbrook is of the view that it is an essential tool in creating a planned economy, even if only for measuring what’s happening. Surprisingly, given he is the author of the Californian Ideology, it seems he shares some views with the crypto-libertarians. My problem is that some of the political tools we create aren’t ones that we’d really want our opponents to have. Say Online Safety Bill, Digital Economy Bill 2010, Investigatory Powers 2016, the list goes on and includes leaving the EU so we can own our state aid and ownership plans, that went well. The interest and progress being made on this in China is interesting, if worrying. In my comment on technology, I note that oceanbase seems to be an interesting and effective distributed database technology that allows horizontal scaling and exceptionally high TPC-C results which have been posted by ANT Financial Services, Alibaba’s bank.

One correspondent has suggested the research is necessary because we don’t want a CBDC gap.

Is this an attempt to re-architect UK money supply to make re-entering the EU more difficult?

The libertarian supporters of crypto-currencies hate this.

Dave Economics, Politics, Technology

4 Replies

  1. It was suggested I look at DeFi, decentralised finance. I was also pointed at this, from zero hedge. The language in the latter is a bit hyperbolic but certainly the transition of the ultimate monetary authority from bankers, appointed by elected officials to bankers not appointed by such with a responsibility for which there is no demos is a problem. The so-called Digital Currency Monetary Authority arranged for a press release to be made.

    If one looks at what the European Union and the UK/Swedish have published then we can see that there are two models, one with a central ledger, which can be detailed or not, and one without, which would seem to require intelligent, unforgeable digital coins or wallets. DeFi it would seem needs the latter. The IT would be complex and as they say, “emerging” at best, using proof of work would be non-feasible and its all vulnerable and the idea of having a wallet with all your money in it would be terrifying. I am also unsure how these solutions plan to solve the two phase commit problem i.e. the trust problem, will I get my money. DeFi also claims to be using stablecoins, which ones and what is the backing asset.

    From the DeFi definition, see above,

    Decentralized finance eliminates intermediaries by allowing people, merchants, and businesses to conduct financial transactions through emerging technology. Through peer-to-peer financial networks, DeFi uses security protocols, connectivity, software, and hardware advancements.

    With respect to zero hedge article and looking further at the Digital Currency Monetary Authority’s web site, it is registered in the Chagos islands but the site has no other contact or ownership details. It looks like another shit-coin to me with a highly authoritative name but not one in conflict with the UN’s trademarks and copyrights. Another thing I’d say, is that his distaste for prohibiting high value cash transaction is common in Europe; it’s been constrained die to banking compliance with money laundering. Financial Intermediaries inc. lawyers need to know their customer.

    I need to read up and think about FedNow, which might be an alternative to CBDC, or it might be an implementation of one.

    Note: I follow and read Zerohedge in order to see what the ultra-libertarians are saying. Some of the views expressed in their comments are distasteful/unacceptable and they do not have a report abuse button. Actually the more I look, the less substantial I find the story on DCMA. The author, apart from his books, has a zero google foot print, often a clue that the is a pseudonym.

  2. I added comments about current card services requiring pre-payment, China’s octopus, and the non-functional requirements of the Bank’s scheme.

  3. I wrote to the BCS policy hub after a seminar they hosted with the Bank of England, I said,

    I agree with the Chair of the House of Lords committee on the subject, Lord Forsyth of Drumlean, Chair of the House of Lords Economic Affairs Committee, said:

    “The introduction of a UK central bank digital currency would have far-reaching consequences for households, businesses, and the monetary system. We found the potential benefits of a digital pound, as set out by the Bank of England, to be overstated or achievable through less risky alternatives.
    “We took evidence from a variety of witnesses and none of them were able to give us a compelling reason for why the UK needed a central bank digital currency. The concept seems to present a lot of risk for very little reward. We concluded that the idea was a solution in search of a problem.”

    I am also concerned that the Bank of England are basing much of the justification on the idea that cash in the bank is not a liability on the Bank of England. It seems to me that these are ideas designed to allow them to walk away from savers when Banks fail. This view is compounded by the idea that they will cap the ownership of digital currency to an amount several times less than the current guarantee of £75,000 per account. There are no quantifiable values to the ideas of innovation, and where real innovations are suggested, they have to be questioned.

    The Bank is also unclear if it really proposes to implement a “platform” model. From my review of the literature, a platform model is a settlement system where intermediaries hold records of an individual or entity’s cbdc balances. The presentation and the benefits case, certainly if we are looking at currency risk, require the Bank to hold customer accounts and presumably create the ludicorus idea of an exchange between the digital currency and cash, or so called private money.

    While they do not propose to pay interest on CBDC deposits, (once again questioning their committment to the platform model); one would have to ask why anyone would continue current account banking in ‘private money’. Certainy the banks would be happy to let the BoE take this business from them.

    This seems to be a left over idea in the Treasury from Rishi Sunak’s time where he imported a bunch of Californian tech bro ideas.

    In my mind the case to do this, and certainly to do it first has not been made and there are significant dangers.

    On the technology side, this can probably be done; it’s a ledger system, it will take significant engineering skill to build to meet the 5 nines availability requirement and 30,000 TPS. The security risk will be, as we have learnt from the crypto currencies, with the intermediaries who perform the role of private/public exchanges. At the least they should be made to classify these systems as GDPR “High Risk” and thus need to ask permission. The ICO (& the Bank) would need to gear up to be able to perform this work in terms of skills and human bandwidth.

  4. The Bank are talking about a CBDC system requiring 30K TPS. How big a system would it take to deliver 30,000 TPS? According to, it’s doable but not easy although those benchmarked systems that can meet the performance peak costed $17m – $35m before enhancement to the five nines availability requirement. I used TPC-C and looked at those system capable of delivering over 100k TPS. There are six, excluding Alibaba’s cloud offerings which use Oceanbase as the database. (I think I need to look some more at that!) The cost per transaction varies and TPC only calculate a price/performance ratio based on capital costs.

    I looked at the HP Superdome and found this, a commentary on its architecture, and also found out that Oracle are still selling hardware badged as a database appliance. Oracle’s results at the TPC-C site remain creditable if ageing.

    For five nines’ availability, one needs a solution with redundant components and capacity to protect against component failure, a second system to protect against system failure, a second site to protect against site failure and a checkpointing storage solution to protect against code corruption. For a banking solution, you need synchronous copy between the systems and sites. This extends the response time. This places a constraint on the distance required between sites with the threat analysis requiring a larger distance and performance requiring a shorter distance. Five nines permits just over 5¼ minutes of downtime/year which means that time to recover from failure, with no loss of data needs to be exceedingly short or unnoticeable and that the mean time between failure is sufficiently high to allow the recovery times to come in under the 5¼ minutes.

    Another thing to be considered, is the risk of flooding; it’s unlikely that the Bank could or should put its computers in the Bank building.

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