Bank of England Discussion Paper on Payments Innovation

Key Points:

1. Objective:
   • The Bank of England (BoE) has released a discussion paper to seek feedback on balancing payment innovation with monetary and financial stability.
2. Key Focus Areas:
   • Financial Stability Risks:
     • Concerns about the separation of financial markets from central bank money.
     • The rise of private digital money forms like tokenized deposits and stablecoins.
   • Central Bank Money and Technology Interaction:
     • Potential risks if central bank money cannot interact with new technologies, leading to a shift towards private settlement assets.
   • Wholesale Settlement Risks:
     • Discussion on the risk appetite for wholesale settlement in central bank money.
3. Real-Time Gross Settlement (RTGS) Service Roadmap:
   • Plans to introduce new RTGS functionalities, including:
     • Extended settlement hours.
     • A synchronization interface for connecting to external ledgers and programmable platforms.
     • Asset settlement in central bank money.
   • Exploration of wholesale central bank digital currency (wCBDC) technologies, though more work is needed to define their roles.
4. Public Feedback Areas:
   • Scalability: Programmable platforms in wholesale financial markets.
   • Innovation Pace: In private money for retail payments.
   • Risks and Benefits: Use of tokenized deposits and stablecoins for wholesale transactions.
5. Feedback Deadline:
   • The public is invited to submit feedback by 31 October 2024.