Illustrative industry architecture to mitigate potential fragmentation across a central bank digital currency and commercial bank money

Lee Braine and Shreepad Shukla

Journal of Financial Market Infrastructures

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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Persistent link: https://EconPapers.repec.org/RePEc:rsk:journ7:7957848

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