EBAday 2024: The future of CBDCs, tokenised deposits and stablecoin adoption

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Referencing the decline in cash transactions, Breeden said that although a retail CBDC must be explored, Breeden firmly believes that “as technological innovation takes place, we must not forget the contribution that retail central bank money has made to monetary and financial stability.”

The wholesale payments infrastructure must also evolve in support of developments on the retail side, and a similar trend is being perceived with central banks around the world experimenting with tokenising central bank money on a separate distributed ledger, otherwise known as wholesale CBDC.

Both retail and wholesale CBDC will impact the uniformity of money in the UK, as with this example, and across Europe. It is important to ensure that the value of money that is issued by different banks is equal, and can be converted one-for-one into cash. Alongside this, it is just as crucial for payments between banks to be settled across central banks, in reserves, through real time gross settlement (RTGS).

However, as the technology that underlies privately issued money evolves – whether that is through tokenised bank deposits or regulated stablecoins, as Breeden explained “this uniformity of money could potentially be bolstered not just by retail CBDC, but also by enhancing the Bank of England’s wholesale payments infrastructure so that it can continue to play its key role in supporting settlement between these new forms of private money.”

No central bank wants to be left behind in this pursuit of CBDC and payments innovation is front and centre when considering enhancing retail and wholesale payments functionality. Recently, Swift confirmed that its CBDC interlinking technology can enable financial institutions to carry out a wide range of