The IIF welcomes the Bank of England discussion paper Central Bank Digital Currency: opportunities, challenges and design, published on March 12, 2020, which provides an important contribution to this emerging field and identifies and fosters discussion on key issues.
The IIF’s comments are primarily concentrated on the implications for financial stability and bank funding. As highlighted in the IIF’s Money Redesigned: CBDCs and Asymmetric Disintermediation paper, the design of a CBDC could have profound implications for the funding and liquidity stability of commercial banks, with a particular risk of disrupting the funding sources that are most valued under the Basel III Liquidity Coverage Ratio and Net Stable Funding Ratio.
We similarly highlight the resiliency of the payment landscape, and questions on how a domestic, retail CBDC may potentially intersect with stablecoins, as well as the potential cross-border implications of an internationally accessible CBDC. The IIF looks forward to working with the Bank of England on this important topic, and to contributing to the further development of safe and effective innovations that can benefit the economy and support stability.