Bank of England

This paper studies the macroeconomic consequences of a central bank granting universal, electronic, 24x7, national-currency-denominated and interest-bearing access to its balance sheet via the issuance, according to well-specified policy rules, of a central bank digital currency (CBDC). To study this issue we use a monetary-financial DSGE model, calibrated to match the United States in the pre-crisis period, that models CBDC as an imperfect substitute for bank deposits in the provision of monetary transaction services, and that models bank deposits as being created through loans or asset purchases as in Jakab and Kumhof (2015).

Central banks and digital currencies: Speech given by Ben Broadbent, Deputy Governor for Monetary Policy, Bank of England at the London School of Economics on Wednesday 2 March 2016.

How low can you go? A Speech given by Andrew G Haldane, Chief Economist, Bank of England.

The Agenda aims to improve the coordination and openness of our research across all policy areas, to ensure the Bank makes the best use of our data, and to cultivate an extensive research community that spans the Bank and beyond.

This article explores the economics of digital currencies — schemes that combine new payment systems with new currencies — and provides an initial view on the consequent implications for the Bank of England’s objectives to maintain monetary and financial stability in the United Kingdom. Any potential risks to monetary or financial stability posed by digital currencies will depend on how widely they are used, both today and in the future. The article therefore begins by examining the extent to which digital currencies are currently used as a form of money. As part of evaluating the likely growth in digital currencies’ usage over time, it next examines the sustainability of the low transaction fees offered by digital currencies at present.

This report discusses more recent developments in payment systems, focusing on the emergence of privately developed, internet-based digital currencies.

‘Money in the modern economy: an introduction’, a companion piece to this article, provides an overview of what is meant by money and the different types of money that exist in a modern economy, briefly touching upon how each type of money is created. This article explores money creation in the modern economy in more detail.