Design note – Blueprint framework

Design notes

The blueprint is one of four workstreams (Diagram 1) in the digital pound design phase. Its purpose is to provide a comprehensive proposition for a digital pound, including technology, operational, ecosystem, commercial, regulatory and financial considerations, and the roles that both the Bank and the private sector could play in delivering it. The recently published progress update sets out the role of the digital pound within the wider retail payments landscape, and summarises work that has been completed to date, along with future plans.

Once complete, the blueprint will be a record of the proposed model and design of a potential digital pound and will form the basis for assessing the benefits and costs.

This design note is not the blueprint. Rather it identifies the key components the Bank and HM Treasury will explore in developing the blueprint. We welcome feedback on whether these components provide a suitable set of focus areas for the blueprint. Design notes will be published on specific topics or blueprint components later in the design phase where it is judged necessary to gather more in-depth feedback on those matters.

Diagram 1: Workstreams of the design phase

What is a digital pound?

The Bank and HM Treasury are exploring the possibility of a digital pound. It would be a digital complement to our existing banknotes, giving households and businesses another way to make and receive digital payments, in step with an increasingly digital economy.

The Bank and HM Treasury have proposed a public-private platform model for the provision of a digital pound. In this model, the Bank would build and operate the ledger – a highly secure, fast and resilient technology platform. Regulated private firms – payment interface providers (PIPs) and external service interface providers (ESIPs) – could then access the core infrastructure via application programming interfaces (APIs). These private sector firms would deal with all user-facing interactions, including handling customers’ information, and be able to develop and offer innovative services using a digital pound.

A digital pound would be issued by the Bank of England and would be seamlessly exchangeable with cash and bank deposits, ensuring the continuity of a trusted, uniform, and accessible means of payment.

As a public-private platform, a digital pound could encourage innovation by allowing a wide and varied range of private-sector firms to develop innovative and user-friendly services.

What is the blueprint framework?

The blueprint framework sets out the aims, scope and focus areas of the digital pound blueprint. We have organised our work around four key components:

• Product vision and strategy: An articulation of the digital pound proposition, including how a digital pound could meet our policy goals, and the utility a digital pound could provide to users, merchants and ecosystem participants.
• Scheme and regulation: The terms and standards for the use and operation of a digital pound, including definition of the roles and responsibilities of both the private and public sector, and matters related to the commercial model for the digital pound.
• Technology: The conceptual and logical design of the technology platform for the core digital pound infrastructure, and the solutions and technologies that PIPs and ESIPs might need to interact with it across the digital pound ecosystem.
• Operations: The different roles, functions, and levels of service required for a continuously available, secure and resilient digital pound infrastructure.

Diagram 2: Digital pound blueprint components

Product vision and strategy

An articulation of the digital pound proposition, including how a digital pound could meet our policy goals, and the utility a digital pound could provide to users, merchants and ecosystem participants.

The Consultation Paper set out two primary motivations for a digital pound:

• sustaining access to central bank money as the anchor of monetary and financial stability; and,
• promoting innovation, choice, and efficiency in payments.

Based on these motivations, we have developed these into long-term aspirations that frame our product vision:

• Central bank money as a publicly provided good:
  • We would like the general public to be aware of the digital pound and trust it to be available to them, reliable and secure, just like they are with cash.
  • End users of the digital pound would be able to move their money with ease between the digital pound, cash, commercial bank money, and other new forms of digital money.
  • The digital pound would complement the use of cash and uphold the broader public policy objectives set out by the Bank and HM Treasury.
• An end-user proposition for retail payments:
  • Our plan would allow for users with digital pound accounts to make a variety of everyday payments.
  • Options for paying with the digital pound would be widely available, offering a cost-effective alternative for both consumers and merchants.
  • End users should find that making and receiving payments with the digital pound is as quick, easy and secure as existing options.
• Enabling an open, dynamic and innovative payments ecosystem;
  • Our intention is for a dynamic and innovative market that would allow existing and new organisations to provide payments as well as complementary services. End users would be able to change their digital pound wallet providers and the services they use.
  • We expect that the digital pound should visibly drive innovation in payments, as intermediaries grow and evolve their services by offering new, valued functionalities that increase choice for consumers and merchants.

We expect that were a digital pound to be built, this product vision would be realised incrementally and over a period of time. We will develop a strategy that includes a roadmap of features a digital pound would have on ‘day one’ as well as the phased delivery of features in the future.

Scheme and regulation

The terms and standards for the use and operation of a digital pound, including definition of the roles and responsibilities of both the private and public sector, and matters related to the commercial model for the digital pound.

The scheme and regulation component describes the use of a digital pound.

• Who would use it, including households, retailers and intermediaries.
• What terms would govern their participation, and how they would be underpinned by legislation, regulation, standards and policies, and roles and responsibilities.

The scheme would offer core services to intermediaries, which are expected to evolve as the needs of users and participants change over time.

The scheme and regulation component has dependencies with other components of the blueprint. For example, privacy considerations are primarily covered under the scheme and regulation component. However, the implementation of privacy controls is highly dependent on the privacy solutions covered under the technology component.

Our engagement with stakeholders has shown that they need clear information on the scheme and regulation of a digital pound to understand its commercial and operational impact. They want to know how these aspects would affect, for example, enforcing limits on business holdings of a digital pound, whether users could hold multiple accounts and where responsibility for compensating consumers for fraud would lie. The answers to such questions will help them determine whether offering digital pound services would be worthwhile.

Many of these scheme and regulatory considerations also apply to other payment systems. To make things simpler for potential PIPs and ESIPs, we will seek to align our approach with existing payment frameworks where possible, avoiding duplication and keeping things consistent.

The scheme and regulation component of the blueprint is expected to include information on the following topics:

• Regulation and policy: All participants within a digital pound ecosystem would be subject to appropriate regulatory frameworks, which includes payments regulation, data protection and privacy. The blueprint will define the intended outcomes, focus areas and anticipated key features of such regulations, taking into account best practices for good governance, resilience, standards of end-to-end risk management and consumer protection. The blueprint will not set out the detail of those regulations, which would be subject to further development, including necessary consultation and cost benefit analysis.
• Scheme outline: The scope, coverage, principles and focus areas for the digital pound scheme. The blueprint will not itself be the detailed scheme rulebook, which would be developed later. The aim of the scheme will be to ensure that a digital pound ecosystem has clearly defined standards, procedures and expected behaviours for all participants and users who provide (and use) digital pound services. This workstream will take account of international practice, current and target industry practice, fraud controls and liability frameworks.
• Users and use cases: A digital pound would be designed to allow third parties to innovate and develop varied use cases to respond to user and merchant needs. The blueprint will establish a provisional and baseline set of core use cases in order to test our design choices, and to help develop the product proposition and the associated value chain for different services. This approach will prevent us from defining the platform in an overly abstract manner, but also not place undue design constraints on third parties who are yet to formulate their use cases. We expect this list of use cases to grow over time, as new ideas are proposed and tested.
• Intermediaries: Consideration of the types of intermediaries which might deliver digital pound services. The blueprint will define the minimum capabilities intermediaries should have in order to deliver digital pound services and the service delivery standards expected of them. It will also identify mechanisms through which a digital pound would be interoperable with different forms of money and how digital pound payment capabilities would integrate with existing (and future) payment capabilities. Any rules which would govern the role of digital pound intermediaries should be driven by risks: with risks to public policy managed by regulation and legislation, and operational risks addressed by digital pound scheme rules. It is envisaged the Bank would develop the scheme rules. 
• Market development: Information that helps potential providers of digital pound services to understand the commercial opportunities that participation in the digital pound ecosystem might present. The blueprint will examine how design choices for a digital pound impact commercial considerations and identify opportunities for providing an innovative digital pound ecosystem.

Once complete, the scheme and regulation component of the blueprint should:

• Wherever possible, reduce unnecessary frictions that may otherwise deter intermediaries who wish to provide digital pound services, in order to support innovation and choice.
• Allow potential participants in the digital pound ecosystem to understand their role, responsibilities and obligations – were they to provide digital pound services.
• Define at a high level the principles and standards for digital pound payments for how the different parties, such as PIPs and ESIPs, deliver services.
• Explain the measures that would be in place to ensure a consistent and predictable operating environment for all parties providing digital pound services.
• Explain how supporting innovation and a competitive and commercially thriving ecosystem can be balanced with protecting end users and participants, for example through a framework for apportioning liability when losses occur in connection to fraud.
• Be flexible to accommodate future developments in technology, payments needs or user behaviours.

Technology

The conceptual and logical design of the technology platform underpinning the core digital pound infrastructure, including the solutions and technologies that might be required for interactions across the digital pound ecosystem.

The technology component of the blueprint will include proposals outlining technology platform, requirements and capabilities required to enable digital pound transactions. It will also cover associated service delivery across the entire payment chain, including integration with existing infrastructure, where possible and desirable. While not exhaustive, the proposals will contain enough detail to support our assessment of the technical feasibility of a digital pound. We expect this component to cover the following topics:

• User devices and payments acceptance: The technical means and standards for end-user devices such as mobile phones and form factors such as debit cards to interact with a digital pound, in a way that both enables a digital pound system to function and meets our desired expectations for user experience.
• Intermediary and ecosystem services: The technical functionality and capabilities that would be delivered by intermediaries and third-party providers under the digital pound platform model,^{footnote [1]} such as wallet services.
• Messaging and application layer: The technical specifications for the data, and data flows, between different parts and parties (eg the Bank of England, PIPs and ESIPs), in the digital pound ecosystem, for both payment and non-payment actions (eg balance checking). It will also outline the layer of the core infrastructure that will orchestrate and enrich messaging flows.
• Platform layer: The architecture that supports how the core ledger will work, the requirements for how it will operate, and the supporting tools to manage performance – including the foundational designs and controls to ensure the core ledger is resilient and secure.

As national infrastructure, a digital pound would need to be highly secure against existing and emerging threats while also being easy to use and accessible.

A digital pound infrastructure would need to manage risks of technology obsolescence. This means that the technology assessment undertaken during the design phase will need to account for developments in a rapidly changing technology landscape – not only changes related to the core infrastructure, but also to user devices, as well as other infrastructure that a digital pound might need to interoperate with.

Operations

The roles, functions, and levels of service required for a continuously available, secure and resilient digital pound infrastructure.

The operations component of the blueprint will define how a digital pound infrastructure would be run, maintained and updated. These considerations are important for understanding the technological viability and operational feasibility of a digital pound ecosystem. We expect this component to include information on the following topics:

• Governance and risk management: The high-level governance structure and risk management requirements for all levels of service delivery. These requirements will be shaped to reflect the standards for operational delivery defined in the scheme outline. In addition, the governance structure will be in place to ensure adherence to the obligations set out in the scheme, with governance applicable to both the public sector delivery of the core infrastructure and the private sector delivery of end-user services.
• Service development: The model and approach that would be needed to manage progressive service enhancements and future requirements.
• Intermediary services: The support that intermediaries might need from the Bank and other parties to facilitate their service development and delivery.
• Technology operations: A dedicated capability will be needed to ensure that the digital pound service operates and runs continuously at the expected service levels of availability and performance. It would also ensure that the requirements for planned maintenance and incident management are understood.
• Cybersecurity operations: A set of ongoing requirements to maintain a strong security posture both for the core infrastructure and across the wider ecosystem.

The operations component will need to account for distinct risks that could arise within a digital pound ecosystem, such as those relating to the organisational complexities introduced, some of which may lie with external parties. It will be important to consider mechanisms for ensuring that availability, security and performance requirements do not unduly impact commercial viability.

Next steps

Developing the blueprint will require input from a range of stakeholders. The Bank and HM Treasury will continue to engage with stakeholders such as banks, fintechs, merchants and charities through existing forums and additional publications. Our goal is to ensure they are informed and involved throughout the design phase, and are able to provide valuable input to contribute to our design work. You can read more about our recent and upcoming work to deliver the digital pound design phase on our news page.

We welcome feedback on the considerations set out in this design note, and in particular whether the components we propose provide a suitable set of topics for the blueprint. You can share your feedback via email to CBDC@bankofengland.co.uk.