The Bank of England’s Financial Policy Committee has set out principles to respond to the significant changes in the payments landscape. Payments regulation should reflect the financial stability risk,  The Financial Times, 13 July 2020, ‘Cross-border payment systems have been neglected for too long’. https://www.ft.com/content/a241d7e0-e1de-4812-b214-b350cbb7d046 2 CPMI, 13 July 2020, ‘Enhancing cross-border payments: building blocks of a global roadmap’. https://www.bis.org/cpmi/publ/d193.htm 1  2  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  2  rather than the legal or technological form, of payment activities. Firms that are systemically important should be subject to standards of operational and financial resilience that reflect the risks they pose, with sufficient data available to monitor emerging risks. These may sound like common sense points, but innovation is increasingly challenging regulators’ ability to ensure they are met. Money and Cash  Returning to the theme of central banks and their particular use of language, an important distinction we often refer to is between central bank and commercial bank money. Literally, this is the distinction between money which is a direct claim on the balance sheet of a central bank and money that is a claim on the balance sheet of an authorised and regulated commercial bank to which the local deposit protection rules apply. Central bank money takes two forms. Reserve accounts are held by banks and other financial institutions and provide part of the stock of high quality liquid assets and from that the balances used to effect the making and settlement of payments between themselves.

What might a CBDC mean for monetary policy transmission – would it bring new tools and fuller, faster transmission of policy choices? To what extent would a CBDC ‘disintermediate’ the banking sector, and what impact would this have on the cost and availability of credit, and the resilience of banking business models and funding? And what services and infrastructure should a central bank offer as part of a CBDC and what might best be left to the private sector? The paper from Brookings in July on ‘Design Choices for CBDC’ helpfully explored a number of these issues, as well as key technological points on the need for interoperability and connectivity between and among central and commercial bank systems for CBDC to function effectively. 8 Such standards are even more important in a world where there might be a need for interoperability and friction-free movement between CBDC, private stablecoins and other payment mechanisms. We, along with international counterparts are considering these closely. The Bank of England is exploring these issues and published its Discussion Paper on CBDC earlier this year,9 setting out key considerations and an illustrative model based on a central bank core ledger and private payment interface providers offering overlay services to users. The paper received a wide range of responses. We are currently working through the responses, continuing to engage with stakeholders and look forward to setting out more information next year. We are also working closely with our international counterparts who are facing the same questions.