Earlier this week, the House of Lords Economics Committee met on the Central Bank’s Digital Currency (CBDC). Baroness Kramer asked if the central bank was considering a wholesale CBDC that would not be available to consumers. The answer is that the private sector itself can achieve a similar result.
Bank of England Governor Bailey and Deputy Governor Sir Jon Cunliffe both rejected the option of a wholesale CBDC at the domestic level.
Bailey emphasized that banks already have access to central bank money through their real-time gross settlement system (RTGS).
âThe retail trade (CBDC) is getting more attention because the public policy issues are bigger. Wholesale is more about, can we use this technology to be more efficient? âSaid Cunliffe.
âWhen people say, why don’t you wholesale, the answer is, we do wholesale. There may be technological changes that the private sector is working on and we are working with them. “
In April the central bank introduced a new type of central bank account, a collective account. This enables several institutions to pool funds in a common account. This means that banks that already have access to central bank accounts can settle with one another using a digital settlement token.
Cunliffe said of the Omnibus account, “There are a number of suggestions to do just that to bring the technology to the wholesale side and we are working with them,” said Cunliffe.
One project that wants to open an omnibus account is Fnality, formerly Utility Settlement Coin, which is supported by 14 major banks and the Nasdaq.
Wholesale CBDC for cross-border transactions
Baroness Kramer is concerned about the UK being left behind and says Standard Chartered is convinced of its perks. âGive them a more efficient and cheaper resolution mechanism and they will move their operations to that location. That creates problems around the City of London and its future, âsaid Baroness Kramer.
Sir John Cunliffe stressed that cross-border payments were another issue. He reiterated the potential for omnibus accounts, but admitted that several central banks would need to give omnibus accounts the green light for international transactions.
Cunliffe chairs the Committee on Payments and Market Infrastructures for the Bank for International Settlements (BIS) and co-chairs a group of central banks that share CBDC learning.
Therefore, he pointed to other solutions that are being explored on an international level, such as linking faster payment systems and using CBDC and stablecoins on new payment channels to improve retail payments.
While it did not provide further details on the cross-border CBDC, several initiatives are underway. These include the Jura project between the central banks of France and Switzerland, the Dunbar project with the central banks of Singapore, Malaysia, Australia and South Africa and the M-CBDC Bridge project with Thailand, Hong Kong, China and the United Arab Emirates.