An Illustrative Industry Architecture to Mitigate Potential Fragmentation across Central Bank Digital Currency and Commercial Bank Money
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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 which 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 United Kingdom (UK) CBDC, including industry ecosystems interfacing with commercial banks using Open Banking application programming interfaces (APIs).
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