A digital pound issued by the Bank of England would provide an alternative, public, digital money an open platform, which would be available to all developers of new digital payment services. Moreover, if designed appropriately, a digital pound could complement and support new forms of private digital money and payment services, for example by acting as the ‘bridging asset’ between  Page 6  different platforms enabling convertibility. By establishing technical standards available to all, it could help ensure interoperability between different platforms. Our assessment is that a digital pound, an alternative, publicly issued form of digital money, available to all, would help ensure competition and innovation and drive efficiency in payments. There are other important potential benefits. There is scope for innovation to generate further efficiencies in payments, allowing for faster and/or cheaper payments. That improvement might be facilitated by new technologies and new entrants to payments markets offering new functionalities. For example, small and medium-sized merchants pay far higher fees for accepting card payments than larger businesses[7]. Although these costs are not paid directly by customers, they may feed into higher prices in the economy overall. And cross-border transactions in particular are often very costly. The average cost of a payment sent to another country is about 6% of the value sent[8]. The digital pound could also complement existing financial inclusion initiatives, for example if it were able to provide for offline payments. It could, with international co-operation, present an opportunity to improve cross-border payments.

World Bank (2022) – Remittances Prices Worldwide Quarterly. 9. The Illustrative Scenario assumed demand for the digital pound was around 20% of retail and business deposits, which was equivalent to nearly all transactional deposits in the banking system. This assumption is particularly cautious for higher interest rate environments when deposits would be expected to pay holders somewhat more interest than an (unremunerated) digital pound. 10. Specifically, a limit of £ would allow 75% of UK income earners to hold their salary, pre-existing balances as well as an illustrative 10% bonus or overtime payment. 11. See for example the work the Bank of England has done with regard to omnibus accounts. 12. See for example BIS Innovation Hub projects looking at this topic - such as mBridge  , Icebreaker, Dunbar and Jura. Page 12  13. Last year the Bank set out its thinking and approach on many of these elements through a consultation on the roadmap for RTGS beyond 2024. See also The road to enhanced payments - speech by Victoria Cleland | Bank of England. As noted, this effort is complemented by work ongoing at the BIS Innovation Hub London Centre to look at the potential benefits from synchronisation under Project Meridian. 14. See Bank of England: ‘New Forms of Digital Money (2021)’ - Stablecoins are cryptoassets that aim to reduce volatility by pegging their value to government-sponsored – or ‘fiat’ – currencies. 15. For an overview see Gaining momentum – Results of the 2021 BIS survey on central bank digital currencies 16.