BoE Consults on Innovation

The Bank of England (BoE) has published its approach to innovation in money and payments, proposing a programme to test infrastructure that supports the settlement of central bank money against digital assets such as stablecoins, tokenised deposits and other innovations. The Bank has published previous papers on the regulation of stablecoins, innovations by deposit-takers and CBDCs.

Key points in the paper include:

• The Bank remains uncertain that programmable platforms will be adopted at scale due to potential challenges around liquidity, fragmentation and capacity but wants to be prepared, just in case.
• The Bank is motivated by a desire to preserve the ‘singleness of money’ and the ‘finality of settlement’. 

Currently the Bank upholds these concepts by measures such as the financial services compensation scheme and special resolution regimes applicable to banks and arrangements that allow for payments to be settled between banks in central bank money. Novel forms of private money may require equally innovative measures to maintain singleness of money and finality of settlement.