Building on the BoE’s work to date, the newly published discussion paper asks for responses on the next step in a wide-ranging conversation on how to deliver an ambitious agenda for the UK payments landscape.

The paper sets out how rapid innovations in payments can impact on the bank’s monetary and financial stability objectives, bringing both opportunities and risks. The paper goes on to set out the BoE’s response to these innovations to date (including renewal of the bank’s real time gross settlement service), and how its response will evolve going forward, so that innovation can take place in a safe way.

The pace of technological change in financial markets over the past few years makes this an opportune moment for the bank to take stock and set out its approach.

The discussion paper sets out the bank’s plans in several areas:

• First, the bank has set out the financial stability risks of financial markets moving away from using central bank money. The Bank’s approach is to preserve the role of central bank money as an anchor for confidence in the financial system.
• Second, to preserve the role of central bank money, the bank will explore technological innovations to the systems it operates, including enhanced functionality for the renewed Real Time Gross Settlement (RTGS) system, and a programme of experiments which would also cover wholesale central bank digital currency (CBDC).
• Third, the bank has set out its objectives in retail payments and the importance of ensuring households and businesses across the UK can make payments with ease, speed and confidence. Meeting these retail payments objectives will require clear and renewed leadership by the UK authorities in this space. The bank will work closely with HM Treasury, the Financial Conduct Authority and the Payment Systems Regulator to achieve this.

Andrew Bailey, Governor of the Bank of England, said: “Confidence in money and payments is fundamental to the bank’s responsibility for monetary and financial stability.

“As innovation in this space continues, our role must also evolve, to support a robust and dynamic UK economy. Building on our work in recent years on new forms of digital money and renewing the bank’s own RTGS infrastructure, we can now do more to explore new technologies in wholesale payments and to encourage greater innovation in interbank retail payments.

“To do that will require input and close collaboration from the private sector and other authorities, and this Discussion Paper sets out our thinking in these areas.”

The BoE invites responses to this discussion paper by 31 October 2024.