Bank of England designs a Staff Working Paper to analyze Central Bank Digital Currencies
Bank of England has recently released a Staff Working Paper (Central bank digital currencies — design principles and balance sheet implications) that states about the models of Central Bank Digital Currencies. There are three models of CBDC which are dependent upon the areas for access.
The limited access ranges from financial institutions like banks and non-bank financial institutions. According to the paper, the direct and indirect access will be extended to homes and non-financial organizations.
The Financial Institution Access model designed for banks and NBFIs, gives the organization an authority to be in touch with the central bank directly without any interference for buying and selling CBDC in exchange for giving any legitimate security. Although, the institutions are not allowed to give any asset which is backed by the Central Bank.
The other model called Economy-wide Access Model has a wider range of CBDC access which is not limited to banks and NBFIs. It also includes households and organizations. Although banks and NBFI have the authority to interact directly with the central bank but “households and firms must use a CBDC Exchange to buy and sell CBDC in exchange for deposits.”
The next model is called Financial Institutions Plus CBDC-Backed Narrow Bank Access Model access is meant for banks and NBFIs only. The model states that there will be a financial institution that will behave like a ‘narrow bank’. It will be responsible for providing the monetary assets to the households and organizations which are supported by CBDC but should not extend credit limit.
Norway is also considering to launch their own Cryptocurrency in future. The Norges Bank paper called “Central Bank Digital Currencies” was released for this purpose.
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