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Financial Institution Of England Publishes Discussion Paper On New Forms Of Digital Cash And Summarises Responses To The 2020 Dialogue Paper On Central Bank Digital Currency

In regular instances, the Bank implements monetary policy by setting the interest rate on central bank reserves. This then influences a spread of interest rates within the economic system, together with these on financial institution loans. Although industrial banks create money through lending, they can't do so freely without limit. Banks are restricted in how a lot they can lend if they are to stay worthwhile in a competitive banking system. Prudential regulation additionally acts as a constraint on banks’ actions to be able to maintain the resilience of the financial system. And the households and companies who receive the cash created by new lending could take actions that affect the inventory of money – for instance, they may rapidly ‘destroy’ money by using it to repay their existing debt.

Before society can realise potential advantages from new forms of digital money, it's essential that views on these points from a variety of stakeholders are understood. Most of the world's central banks are wanting into the potential of creating such a foreign money, but the one one already in existence is China's digital yuan, which is presently present process public testing. Chancellor Jeremy Hunt said the central-bank digital forex (CBDC) could probably be a model new "trusted and accessible" way to pay. We are additionally working internationally with other governments and central banks. For example دوره ارز دیجیتال we now have labored with the Bank for International Settlementsand nbsp;on tasks such as Rosalind, which goals to develop innovate use circumstances for CBDC.

The government should also weight the attainable impacts on monetary coverage and the operational administration of the swap from conventional cash to a CBDC. Virtual currencies are unregulated digital currencies managed by developers or a founding group consisting of assorted stakeholders involved within the process. Virtual currencies may also be algorithmically controlled by a defined network protocol.

For example, when a financial institution extends a mortgage to someone to buy a home, it doesn't typically do so by giving them 1000's of pounds value of banknotes. Instead, it credit their bank account with a bank deposit of the size of the mortgage. An different scenario is one in which commercial banks scale back lending to the real financial system. In this case, it's potential that non-banks would prolong extra credit score to the true economic system immediately. Many superior economies operate with larger levels of non-bank finance than the UK and with correspondingly smaller shares of household assets held as deposits with the banking system (Chart 1.1). But non-bank finance is unlikely to be a perfect substitute for bank finance, especially for lending to some smaller firms.

These initiatives could make vital impacts on the funds landscape, even without any new forms of digital money. The function of these expectations is to make sure the same degree of public confidence in stablecoins – both as a method of payment and a retailer of worth – as industrial financial institution cash. How the FPC’s stablecoin expectations might be met in apply is discussed in Section 5 of this Discussion Paper. The Bank’s decisions around new forms of digital cash might be guided by its core goals, central to which is guaranteeing confidence in sterling.The Bank’s mission is to advertise the nice of the people of the United Kingdom.