LONDON--(BUSINESS WIRE)--Project New Era, a ground-breaking initiative in the UK led by The Payments Association (formerly The Emerging Payments Association (EPA)), paywith.glass and other private industry stakeholders, supported by Boston Consulting Group (BCG) as its consulting partner, today announces the publication of the Green Paper report ‘A New Era for Money’. The paper advocates for a first of its kind collaboration between central banks, regulators, commercial banks and other financial institutions (FIs) towards the exploration of a retail Central Bank Digital Currency (CBDC) in the UK. The Green Paper will be followed by real-world pilots to address open design questions and mitigate risks. The pilots will generate working data and feedback that central banks and policymakers can use to inform open design questions and enable relevant authorities to make policy decisions.
CBDCs have emerged in recent years in response to the decline in cash payments, the search for payment efficiencies and the emergence of private digital currencies, such as cryptocurrencies and stablecoins. Most central banks are currently researching CBDCs with The Bahamas, Cambodia and Nigeria already launching full implementations. China is expanding its pilot of a ‘Digital Yuan’ to tens of millions of users and India has recently announced a Digital Rupee, expected by 2023.
The primary benefits of CBDCs include near-instant settlement, the potential for reduced transaction costs, enhanced security and programmable payments - a new breed of automated payment. Secondary benefits like financial inclusion vary in materiality by country; while monetary policy implementation and countering the threat of stablecoins with a CBDC are yet to be established. The report suggests there is potential for a CBDC to power an alternative, regulated digital currency ecosystem that could otherwise be filled by privately issued alternatives such as stablecoins.
“Much has been written about the challenges posed by a retail CBDC, including the macroeconomic risks like bank disintermediation and the role of commercial banks and other FIs in the new ecosystem,” comments Kunal Jhanji, Managing Director and Partner at BCG. “These challenges require the public and private sectors to come together and create an inclusive framework for new infrastructure, legislation and policy that resolves open questions and responsibly unlocks the transformative benefits of digital money for the UK.”
Other important considerations from the research, include:
- Cryptocurrency and stablecoin exchange volume growth have both been >1000% across 2020-21, further indicating the potential for CBDCs .
- Central bank CBDC research and broader topic interest is intensifying in response: ~90 central banks analysed are publicly exploring aCBDC, with a focus on retail applications and three full launches.
- ~70% of these central banks remain in a research phase, with limited public-private initiatives and experimentation.
- Central banks can bring the industry together with an inclusive roadmap for public-private collaboration to address open questions, risks and intended roles left to commercial banks and other financial institutions.
To facilitate this, Project New Era aims to form a private consortium in the UK, (‘Digital FMI Consortium’), with central banks, regulators, and government kept informed of progress. The consortium will issue dSterling, a digital settlement asset similar to a CBDC, to drive the pilot. The pilot will focus on core design issues, including the role of commercial bank liability in a CBDC environment, withdrawal limits and other measures as mitigations to deposit disintermediation and other risks identified.
The focus of the Consortium will be to undertake a set of pilots to enable real-world testing of the initial use cases identified – including:
- Retail payments: Delivering benefits of faster payment settlement and potential to reduce transaction costs for merchants. Programmability enabling innovative use cases like conditional payments, and near-instant pay-per-use micropayments.
- Cross-border transactions: Enabling near-instant settlement, reduced transaction costs, and enhanced payment traceability compared with existing solutions. Exploring interoperability requirements in order to future-proof the digital financial market infrastructure (Digital FMI)
- Tokenisation-as-a-Service: Providing infrastructure for future use cases that enables private organisations on the Digital FMI to tokenise and transact assets for use in closed ecosystems with customers or suppliers. The assets can be financial, utility-based, or physical.
- Servicing Payment Institutions (PIs) and Electronic Money Issuers (EMIs): Enabling PIs and EMIs to use the dSterling as a secure, liquid asset with regulatory acceptance for safeguarding. The asset also enables access to an alternative payment rail, given challenges in the industry around non-bank access to banking.
Speaking on the launch of the Green Paper, Tony Craddock, Director General of The Payments Association, says: “The widespread adoption of CBDCs could be as important to the 21st century as the end of the gold standard was to the 20th. Because of the UK’s long-standing position at the forefront of global financial services we have an opportunity to take a leading role in the next generation of financial services. Our next step will be to build a larger stakeholder network from the public and private sector that will be key in building the pilot project.”
Paul Sisnett, Chief Executive Officer at paywith.glass, adds: “Implementing an entirely new form of digital money is a significant undertaking. It is therefore vital that government bodies, policymakers, the private sector and ultimately the consumers who will be using the currency, have high quality data on which to base their decisions. Through unprecedented collaboration with the most innovative financial services organisations, this is the only initiative of its kind that will generate those data points.”
The Green Paper is available for download here: https://thepaymentsassociation.org/consultations/a-new-era-for-money/?utm_source=Media&utm_medium=Press+release&utm_campaign=Green+Paper+launch
To register for The Payments Association’s Insights webinar on 17th February, please visit: https://epa.glueup.com/event/47791/register/
For more information, visit: https://thepaymentsassociation.org/
About The Payments Association
The Payments Association (previously the Emerging Payments Association or EPA) is a community for all companies in payments, whatever their size, capability, location or regulatory status. Its purpose is to empower the most influential community in payments, where the connections, collaboration and learning shape an industry that works for all. It works closely with industry stakeholders such as the Bank of England, the FCA, HM Treasury, the PSR, Pay.UK, UK Finance and Innovate Finance.
Through its comprehensive programme of activities and with guidance from an independent Advisory Board of leading payments CEOs, The Payments Association facilitates the connections and builds the bridges that join the ecosystem together and make it stronger. These activities include a programme of monthly digital and face-to-face events including an annual conference, PAY360, The PAY360 Awards dinner, CEO round tables and training activities. The Payments Association also runs six stakeholder working project groups covering financial inclusion, regulation, financial crime, cross-border payments, open banking and digital currencies. The volunteers in these groups represent the collective views of the industry and work together to ensure the big problems facing the industry are addressed effectively. The association also conducts original research which is made available to members and the authorities. These include monthly whitepapers, insightful interviews and tips from the industry’s most successful CEOs.
paywith.glass is the world's first intelligent Digital Currency/Electronic Payment (iDC/EP) infrastructure. By combining Artificial Intelligence, Blockchain and Distributed Cloud technologies, we have designed supporting infrastructure for the digital sterling to the strict service level standards that are required for critical telecommunications infrastructure. We rely on the use of proprietary distributed technologies for both the storage of the data and the routing of digital messages, backed by a network of human and AI-based specialists who carry out continuous monitoring and support of all underlying systems.
The result is a globally scalable multi-Central Bank Digital Currency (mCBDC) architecture and a resulting FMI that promotes a truly inclusive digital economy, to empower billions of people to transact instantly with full compliance, from anywhere on Earth and at any time.