LONDON–(BUSINESS WIRE)–Project New Era, a groundbreaking initiative in the UK led by The Payments Association (formerly The Emerging Payments Association (EPA)), paywith.glass and other private sector stakeholders, supported by Boston Consulting Group (BCG ) as its consultant, today announces the publication of the Green Paper Report “A New Era for Silver”. The document calls for a first-of-its-kind collaboration between central banks, regulators, commercial banks and other financial institutions (FIs) to explore a retail central bank digital currency (CBDC) in the Kingdom -United. The green paper will be followed by real-world pilots to answer open design questions and mitigate risk. The pilots will generate working data and feedback that central banks and policymakers can use to inform open design questions and enable competent 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 “digital yuan” pilot project to tens of millions of users and India recently announced a digital rupee, expected by 2023.
Key benefits of CBDCs include near-instant settlement, potential for lower transaction costs, enhanced security, and programmable payments – a new generation of automated payments. Secondary benefits such as financial inclusion vary in materiality by country; while the implementation of monetary policy and the fight against the threat of stablecoins with a CBDC have yet to be established. The report suggests that it is possible for a CBDC to power an alternative, regulated digital currency ecosystem that might otherwise be populated by privately issued alternatives such as stablecoins.
“Much has been written about the challenges posed by a retail CBDC, including macroeconomic risks such as bank disintermediation and the role of commercial banks and other FIs in the new ecosystem,” comments Kunal Jhanji, Managing Director and Partner of 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 emerging from the research include:
Cryptocurrency and stablecoin exchange volume growth were both >1000% in 2020-2021, further indicating the potential for CBDCs.
Central bank CBDC research and broader interest in the topic is growing in response: approximately 90 analyzed central banks 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 sector together with an inclusive roadmap for public-private collaboration to address open questions, risks, and anticipated 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 IMF 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 pilot the pilot. The pilot will focus on key design issues, including the role of commercial bank liability in a CBDC environment, withdrawal limits and other mitigation measures for deposit disintermediation and other identified risks. .
The objective of the consortium will be to undertake a set of pilot projects to enable real-world testing of the initial use cases identified, including:
- Retail payments: Delivering the benefits of faster payment settlement and the ability to reduce transaction costs for merchants. Programmability enabling innovative use cases such as conditional payments and near-instantaneous pay-as-you-go micropayments.
- Cross-border transactions: Enables near instantaneous settlement, reduces transaction costs and improves traceability of payments compared to existing solutions. Explore interoperability requirements to future-proof digital financial market infrastructure (Digital IMF)
- Tokenization as a service: Provide infrastructure for future use cases that allows private organizations on the digital MFI to tokenize and trade assets for use in closed ecosystems with customers or vendors. Assets can be financial, utilitarian or physical.
- Serve Payment Institutions (PI) and Electronic Money Issuers (EMI): Enable PIs and EMIs to use dSterling as a secure liquid asset with regulatory acceptance for backup. The asset also provides access to an alternative payment rail, given industry challenges regarding non-bank access to banking services.
Speaking at the launch of the Green Paper, Tony Craddock, CEO of the Payments Associationsays, “Wide adoption of CBDCs could be just as important for the 21st century as the end of the gold standard was in the 20and. Because of the UK’s longstanding position at the forefront of global financial services, we have the opportunity to play a leading role in the next generation of financial services. Our next step will be to create a broader network of public and private sector stakeholders that will be essential to building the pilot project. »
Paul Sisnett, CEO of paywith.glass, adds: “Implementing an entirely new form of digital currency is a significant undertaking. It is therefore essential that government agencies, policy makers, the private sector and ultimately the consumers who will use the currency have high quality data on which to base their decisions. Through unprecedented collaboration with the most innovative financial services organizations, this is the only initiative of its kind that will generate these 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 February 17, go to: https://epa.glueup.com/event/47791/register/
For more information visit: https://thepaymentsassociation.org/
About the Payments Association
The Payments Association (formerly Emerging Payments Association or EPA) is a community for all payments businesses, regardless of size, capacity, location or regulatory status. Its goal is to empower the most influential community in payments, where connections, collaboration and learning shape an industry that works for everyone. It works closely with industry players such as the Bank of England, FCA, UK Treasury, PSR, Pay.UK, UK Finance and Innovate Finance.
Through its comprehensive program of activities and the guidance of an independent advisory board of leading CEOs, The Payments Association facilitates connections and builds the bridges that unite the ecosystem and make it stronger. These activities include a program of monthly digital and face-to-face events, including an annual conference, PAY360, the PAY360 Awards Dinner, CEO roundtables and educational events. The Payments Association also manages six stakeholder 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 that the big issues facing the industry are effectively addressed. The association also conducts original research which is made available to members and authorities. These include monthly white papers, insightful interviews and advice 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 a support infrastructure for the digital sterling according to the strict service level standards required for critical telecommunications infrastructures. We rely on the use of proprietary distributed technologies for both data storage and digital message routing, backed by a network of human and AI-based specialists who perform ongoing monitoring and support of all underlying systems.
The result is a globally scalable multi-central bank digital currency (mCBDC) architecture and IMF that promotes a truly inclusive digital economy, to enable billions of people to transact instantly in full compliance, anywhere on Earth at any time.