Date: 5 May 2022
Item 1: Welcome
Co-chairs Charles Roxburgh and Jon Cunliffe welcomed Members to the third meeting of the CBDC Engagement Forum.
Item 2: Debrief of the last Technology Forum
The Bank of England provided a brief summary of the March Technology Forum meeting.
Item 3: Person to business payments with CBDC
The Bank of England introduced the discussion. They noted the objective of the session would be to discuss opportunities CBDC could potentially present for retail payments, were one to be introduced in the UK.
One Member presented on the conditions that would need to be in place for a retail CBDC to be adopted in the UK by consumers and merchants. It was noted that any CBDC proposition would need to support consumer and business needs to a degree comparable to currently available payment options. In order to achieve adoption as a payment method, CBDC would need to offer a compelling proposition for consumers. Likewise, CBDC would need to offer a proposition for merchants to justify the investment in building the capability for acceptance. Whilst recognising the two-sidedness of payments, it was suggested that a sufficiently compelling product for consumers might encourage adoption by merchants if enough consumer demand were to exist. A clear roadmap of technical requirements would be needed to ensure smooth adoption of any potential CBDC.
The presenter suggested a set of pre-conditions for CBDC ranked by difficulty and importance to the success of CBDC as a new payment rail. Elements such as standards and rules, KYC, ecosystem support and industry coordination were noted as relatively more complex to achieve but also potentially most important to the successful adoption of CBDC for use in retail payments.
The presenter mentioned the cost of accepting payment in CBDC as an essential element for adoption by merchants.
However, the presenter noted that some elements of current payment alternatives, such as convenience or consumer protection, were valued and relevant, and might not be part of a CBDC value offering.
Some Members thought that programmability and smart contracts could have potential to drive demand for CBDC payments in the digital world that could translate into usage at the Point of Sale.
A second Member provided an overview of their firms’ findings from a survey on merchant and consumer sentiment with respect to cryptocurrencies. The presentation suggested that consumers were increasingly interested in using cryptocurrencies to invest and also as a means of payment for everyday services. This was driving merchant interest in cryptocurrencies, looking to capitalise on this trend. Perceived benefits of accepting payment in cryptocurrencies for merchants included potential improvements on the speed, cost, and ease of settlement. However, user experience, the riskiness and volatility of cryptocurrencies, regulatory uncertainty and a general lack of understanding all have had an impact on adoption.
Members discussed the argument that rising interest in crypto could indicate greater appetite for a CBDC, but also noted that those needs might be met by appropriately regulated and well trusted private e-money issuers and stablecoins.
Members discussed whether new forms of digital money might offer lower costs than current alternatives, supporting adoption. They noted consumer protection was one issue that would need to be considered alongside costs.
A third Member presented two possible, stylised CBDC configurations, a programmable CBCD to improve retail payments and a narrow CBDC to promote inclusivity at point of sale. With regard to the former, the presentation noted that programmability could add a novel function to money, leading to new applications, but also enhancing traditional functions of money. Gym membership payments were used as an example where programmability and smart contracts could bring improvements by adding payment based on usage, reducing risk for merchants, and generating richer data.
The second proposition outlined a narrow CBDC for inclusion purposes with lower identification requirements capped at low volumes of spending. The possible benefits of this CBDC would be the ability to replicate some features of physical cash, and the potential to facilitate access to digital payments with streamlined KYC and on-boarding processes (e.g., a mobile phone number). These simplified processes would reflect smaller financial crime and fraud risks of low volume transactions.
Members discussed whether current KYC regulation would need to be changed in order to accommodate such proposition. Some members noted that digital ID could be helpful in this space.
The co-Chairs closed the meeting and thanked the Members for their contributions. The next meeting would be in July 2022.
Annex: Meeting documents:
Jon Cunliffe (Chair), Bank of England
Charles Roxburgh (Chair), HM Treasury
Tom Mutton, Bank of England
Danny Russell, Bank of England
Ben Dovey, Bank of England
Frankie Evans, HM Treasury
Adam Jackson, Director of Policy, Innovate Finance
Andrew Murphy, Executive Director for Operations, John Lewis Partnership
Arun Kohli, COO EMEA, Morgan Stanley
Arunan Tharmarajah, Head of European Banking, Wise
Bryan Zhang, Executive Director, Cambridge Centre for Alternative Finance, the University of Cambridge Judge Business School
Chris Rhodes, CFO, Nationwide Building Society
Diana Layfield, President of EMEA Partnerships, Google
Jana Mackintosh, Managing Director Payments & Innovation, UK Finance
Jess Houlgrave, Chief of Staff, Checkout.com
Jorn Lambert, Chief Digital Officer, Mastercard
Judith Tyson, Research Fellow, Overseas Development Institute
Martin McTague, National Policy Chair, Federation of Small Businesses
Matthew Hunt, Chief Strategy Officer, Deputy CEO, PayUK
Natasha de Terán, Member of the Financial Services Consumer Panel
Paul Bances, Head of Global Market Development of Blockchain, Cryptocurrency, and Digital Currencies, PayPal
Paul Thwaite, CEO Commercial Banking, NatWest Group
Polly Tolley, Director of Impact, Citizens Advice Scotland
Rodney Garratt, Professor of Economics, University of California Santa Barbara
Ruth Wandhöfer, Chair, PSR Panel
Simon Coles, CTO, PayPoint
Simon Gaysford, Founder & Director, Frontier Economics
Simon Gleeson, Financial Regulatory Group Lead, Clifford Chance
Stephen Gilderdale, Chief Product Officer, SWIFT
Tracey McDermott, Group Head of Conduct & Financial Crime, Standard Chartered Bank
Anne Boden, CEO, Starling Bank
Charlotte Hogg, CEO, Visa Europe.
Christian Catalini, Chief Strategy Officer, Lightspark
Chris Wilford, Head of Financial Services Policy, CBI
Georges Elhedery, Co-CEO Global Banking & Markets, HSBC
Reema Patel, Head of Deliberative Engagement, Ipsos UK