Illustrative Industry Architecture to Mitigate Potential Fragmentation across a Central Bank Digital Currency and Commercial Bank Money

• URL: http://arxiv.org/abs/2203.17018v2
• Date: Fri, 17 Jan 2025 09:18:10 GMT
• Title: Illustrative Industry Architecture to Mitigate Potential Fragmentation across a Central Bank Digital Currency and Commercial Bank Money
• Authors: Lee Braine, Shreepad Shukla,
• Abstract summary: Adoption of a CBDC can risk fragmenting both payments markets and retail deposits. We present an illustrative industry architecture that places CBDCs and commercial bank money on a similar footing. We focus on a potential UK CBDC, including industry ecosystems interfacing with commercial banks using Open Banking application programming interfaces.
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• Abstract: Central banks are actively exploring central bank digital currencies (CBDCs) by conducting research, proofs of concept and pilots. However, adoption of a CBDC can risk fragmenting both payments markets and retail deposits. In this paper, we aim to provide a mitigation to this fragmentation risk by presenting an illustrative industry architecture that places CBDCs and commercial bank money on a similar footing. We introduce the concept of ecosystems providing a common programmability layer that interfaces with the account systems at both commercial banks and the central bank. We focus on a potential UK CBDC, including industry ecosystems interfacing with commercial banks using Open Banking application programming interfaces.

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