Bayes students speak Crypto to power

Bayes students presented their analysis of the case for an official UK digital currency to Bank of England staff recently.

As part of their coursework, third year actuarial  science students studying the financial technology module analysed whether the Bank should develop and roll out a central bank digital currency (CBDC). In their imagined role as an analyst at the nation’s central bank, they were asked to make a recommendation.

The students ended up doing that in the grand corridors of power in Threadneedle St, the Bank’s home since the 1730s.

A genuine knowledge exchange

Oliver Manyemba, a lecturer in actuarial science who teaches on the FinTech programme, said: “This may be the first time the Bank has invited students from any university to present in this way. The Bank is very interested in what young people are thinking about CBDC. It was clear from the interactions with Bank officials and the questions they asked after each presentation that the students’ input was of real value.”

The students had worked in two groups to analyse the case for a CBDC in the UK and suggest a strategy and implementation plan.

One group’s work – and presentations – included case studies of Apple Pay and the People’s Bank of China digital currency, both of which launched in 2014.

Their analysis helped the students identify concerns – including:

• Financial inclusion
• Building public trust
• Privacy and security
• Managing outages in key infrastructure.

They concluded that the 330 year old Bank would need to prioritise “a robust infrastructure capable of preventing outages and maintaining public trust”.

The students continued: “Localised trials, particularly in marginalised communities will gather critical data ensure accessibility. Public education initiatives, supported by partnerships with banks and financial literacy programmes, are essential for a smooth transition.”

The second group studied CBDCs in Finland, Nigeria and The Bahamas.

The group began their presentation by noting the massive impact and historic nature of a decision for the UK to follow following those nations.

“The Bank of England (BoE) stands at a pivotal juncture as it contemplates the adoption of a CBDC. Given the rapid evolution of the global financial landscape, driven by digitalization and the increasing adoption of cryptocurrencies, the implementation of a CBDC could be a critical move in modernizing the UK's financial system.”

“The introduction of a Central Bank Digital Currency (CBDC) could play a pivotal role in reinforcing the stability and efficiency of the UK's financial system. A government-backed digital currency issued by the Bank of England (BoE) would serve as a reliable medium of exchange, offering a secure alternative to existing forms of money.

“The inherent stability of a CBDC, underpinned by the credibility of the BoE, would instil greater confidence among users, especially during periods of financial uncertainty. In addition to providing an alternative to traditional banking channels, a CBDC could streamline cross-border payments, reducing settlement times and operational costs.”

It could, they said, be a boon to UK exporters and improve the competitiveness of the country’s financial sector.

While recommending that the Bank pursue a CBDC, they emphasised the need for careful planning.

“The transition must be approached with caution, ensuring that the design and implementation of the digital pound align with the UK’s economic objectives and societal values. By following the recommended phased approach and learning from international case studies, the BoE can position itself as a leader in the global financial innovation landscape, ensuring the UK remains at the forefront of financial stability and technological advancement.”

The Bank’s Senior Technical Advisor for CBDC, Data & Payments, William Lovell, who hosted the event, said the presentations were a valuable contribution to the Bank’s work in the area.

“A few years ago it was clear that business schools weren’t teaching students about electronic payments and related issues and processes. It was good to get the insights of the students through these high-quality presentations.”

A unique opportunity

One of the student presenters, Keona Djin, said: “I am grateful for the strong partnership that has developed between Bayes Business School and the Bank of England, as it gave me a remarkable opportunity to engage with a prestigious institution within the global financial sector.

“While I initially felt a degree of nervousness presenting my ideas and recommendations to senior officials who are exploring this issue, the experience proved to be immensely rewarding.  The opportunity to refine my thoughts and receive constructive feedback was invaluable, and I was particularly encouraged by the positive engagement from the Bank's representatives.”

Her fellow student, Tianze Li, said: "Presenting at the Bank of England was an invaluable experience that enhanced my understanding of Central Bank Digital Currency (CBDC) and its implications for the financial sector. The process of preparing the presentation challenged me to think critically and collaboratively. Receiving positive feedback from senior government advisors was incredibly rewarding. This opportunity has deepened my passion for contributing to innovative financial solutions."

Dr Ioannis Moutzouris, the Associate Dean for Employability and Engagement, thanked Oliver and all those involved at the Bank of England for engaging with the students.

“At Bayes we work to maximise the benefits of our position in the City of London to equip students with the knowledge and insights to make a real difference in business and the wider world. This experience was a brilliant example of that and of our wider collaboration with the Bank as it was very much a two-way interaction between the hugely respected Bank of England officials and our students.”