The Bank of Englands experiments with central bank digital currency – innovations in the financial system

Bank of England Testing Central Bank Digital Currency in New Experiment

The Bank of England (BOE) is planning to conduct an experimental program using the Real-Time Gross Settlement (RTGS) system and central bank digital currency (CBDC) to assess their clearing capabilities and interoperability.

Experiments with CBDC

BOE will carry out five experiments, including three involving delivery-versus-payment (DvP) transactions with securities and one involving payment-versus-payment (PvP) transactions in foreign currencies, as well as an experiment utilizing multiple assets and currencies on a single platform. These experiments will be based on the Meridian and Agora projects.

RTGS and DLT System Research

A new version of the RTGS system, CHAPS, is set to be introduced in the next few months. The Bank of England also plans to conduct research on the application of Distributed Ledger Technology (DLT) in the case of a central bank digital currency. There is also a plan to study various synchronization approaches.

Encouragement for Feedback

BOE emphasizes the need to consider various design issues during the experiment implementation. The central bank encourages feedback on their paper until October 31, taking into account the impact of technology on monetary and financial stability.

Potential and Challenges of CBDC

The Bank of England is testing various scenarios for the use of central bank digital currency and experimenting with different types of transactions to better understand the potential benefits and challenges associated with introducing digital currencies. These experiments will help assess the clearing capabilities and interoperability of CBDCs, as well as their impact on the financial system. The anticipated effects of these experiments could have significant implications for the future of payment and settlement systems.