Although the Bank of England has no plans to release the state of digital currency, but last Friday he published a working paper, which presented three scenarios of potential risks and problems related to the financial stability of the currency issued by Central banks (CBDC).
According to representatives of Bank, their analysis is useful for researchers of digital currencies, because it provides a clear understanding of how CBDC can in practice affect the balance sheet accounts.
The list includes CBDC, is available only to banks and non-Bank financial institutions (NBFIs), as well as the digital currency of the Central Bank, provided to the population and non-financial companies directly or indirectly.
In the first model, the exact number of CBDC Central Bank can only banks and NBFIs. In this approach, financial institutions get digital currency of the Central Bank in exchange for securities that meet the specified criteria (mainly government bonds). In this case, households and companies cannot indirectly purchase their digital currency from the Central Bank.
In the second case, CBDC can act as money for all agents of the economy. However to buy and sell CBDC, the Central Bank will be able only to banks and NBFIs, but households and firms will need to apply for a special exchange, where they will be able to purchase CBDC in exchange for deposits, and Vice versa.
The third model is also limited to banks and NBFIs. However, it is present at least one financial institution that acts as a “narrow Bank,” providing households and companies in financial assets, but not providing loans.
According to analysts of the Bank of England, while there is no reason to believe that the introduction of the CBDC will have a negative impact on private credit or public provision of liquidity in the economy. However, this is only a preliminary conclusion, and further in the text of the report emphasizes the need for further research.
Recall that the Bank for international settlements (BIS) in March suggested that the release of the CBDC may cause an outflow of capital from commercial banks.
It is worth noting that other countries are also studying the possibility of creating a digital currency issued by the Central Bank. So last week came the news that the Swiss Government turned to lawmakers with a request to conduct a study on the pros and cons of the Swiss “electronic Frank”.
Also in mid-may, the Norwegian Central Bank released a working paper on CBDC. The report, prepared by Norges Bank, examines the aspects that, in the opinion of the Bank, should be considered when estimating the output of the CBDC.