{"id":7437,"date":"2023-03-12T17:40:59","date_gmt":"2023-03-12T17:40:59","guid":{"rendered":"https:\/\/davelevy.info\/wiki\/?p=7437"},"modified":"2023-05-31T20:28:06","modified_gmt":"2023-05-31T20:28:06","slug":"central-bank-digital-currency","status":"publish","type":"post","link":"https:\/\/davelevy.info\/wiki\/central-bank-digital-currency\/","title":{"rendered":"Central Bank Digital Currency"},"content":{"rendered":"\n

The Govt have issued a consultation<\/a> 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. … <\/p>\n\n\n\n\n\n\n\n

I link to the consultation<\/a> above, but they also issued a press release<\/a> with more supporting material including a technology paper<\/a>. The technology page has an address to reply to<\/a>. 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, CBDC@bankofengland.co.uk<\/a>.<\/p>\n\n\n\n

What the Bank think & plan<\/h3>\n\n\n\n

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<\/strong>. The key difference is whether consumers or businesses have direct access to their accounts. <\/p>\n\n\n\n

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.<\/p>\n\n\n\n

The EU blog article<\/a>, 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. <\/p>\n\n\n\n

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.<\/p>\n\n\n\n

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. <\/p>\n\n\n\n

Why?<\/a> 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 \u2018pay the bearer\u2019.” 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 \u00a385,000<\/p>\n\n\n\n

Here’s some more reading.<\/p>\n\n\n\n

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  1. What is a central bank digital currency?<\/a> by the BoE<\/li>\n\n\n\n
  2. A consultations; the digital pound. a new form of money for households & businesses<\/a> on gov.uk<\/li>\n\n\n\n
  3. The digital pound technology working paper<\/a> by the BoE, not really, more an organisational architectural options paper.<\/li>\n\n\n\n
  4. I have found, the Minutes of the CBDC Technology Forum – November 2021<\/a>, which hosts a presentation, Item 2 Models of CBDC Provision<\/a>, 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, <\/li>\n<\/ol>\n\n\n\n

    What Europe is doing<\/h3>\n\n\n\n

    Some thoughts from Europe, Banks and Academia<\/p>\n\n\n\n

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    1. Central bank digital currency<\/a> from the EU’s EDPS, European Data Protection Supervisor. <\/li>\n\n\n\n
    2. Central bank digital currency, is it a good idea?<\/a> 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. <\/li>\n\n\n\n
    3. An Illustrative Industry Architecture to Mitigate Potential Fragmentation across Central Bank Digital Currency and Commercial Bank Money<\/a>, by Lee Braine<\/a>, Shreepad Shukla<\/a>, I think this talks about models. <\/li>\n\n\n\n
    4. Deloitte on the topic, a preso entitled, “Are central bank digital currencies, the currency of tomorrow?<\/a>“<\/li>\n\n\n\n
    5. The ECB, “Tiered CBDCs and the Financial System<\/a>“.<\/li>\n\n\n\n
    6. CBDCs: The Good, The Bad, And The Ugly<\/a>, at crunchbase, by Reuben Jackson, a block chain consultant. 🤷<\/strong><\/li>\n<\/ol>\n\n\n\n

      Sweden, one of the lowest cash using societies in Europe and a nation of 10\u00bd million are trialling CBDC, the UN\/ITU comments<\/a>, mainly historical, but states they don’t intend to act as payment processors, the Rijks Bank publish this, an index\/home page<\/a>, and this, a technical report<\/a>. , \u00a7<\/strong>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, <\/p>\n\n\n\n