Bank of England Publishes Working Paper Exploring State-Backed Crypto

The Bank of England has published a staff working paper examining the risks associated with the creation of central bank digital currencies, which the paper refers to as CBDCs.

Three models of a CBDC are laid out in the paper, each with a different set of sectors that have access to the CBDC.

The narrowest model, the Financial Institutions Access model, grants restricted access to to the CBDC by banks and non-banking financial institutions. In this model, financial institutions are granted the ability to interact directly with the Bank of England to buy and sell CBDC in exchange for qualifying securities. Additionally, an eligible institution would act as a ‘narrow bank,’ a bank that provides households and firms with CBDC assets, but cannot extend credit.

The broadest model, the Economy-Wide Access model, allows for indirect and direct access extended to individuals and non-financial entities. Under this model, the CBDC could act as money for all participants in an economy. Banks and NBFIs are still the only ones who can buy CBDC directly from the central bank. Other legal entities who wish to purchase CBDC will need to do so via “a CBDC Exchange to buy and sell CBDC in exchange for deposits.”

CBDCs Are Closer to Becoming an Everyday Reality Than Ever, But That Still Doesn’t Mean Soon

While widespread implementation of CBDCs is not likely to happen anytime in the relatively near future, a growing number of countries around the world are exploring the option. The Bitcoin Bitcoin While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that Read this Term News reported that the Norwegian Norges Bank issued an investigative working paper on CBDCs just last week; Sweden’s Sveriges Riksbank has been exploring the creation of the e-krona. Even the People’s Bank of China has looked into minting a digital currency of its own.

The working paper was not the Bank of England’s first foray into Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Read this Term. In mid-April, BoE published a proof-of-concept outlining a digital distributed ledger network that “[explored] some of the key questions that could arise from ensuring privacy on a distributed ledger system.”