New forms of digital money

Overview: There are two forms of money most commonly used in the UK. Central bank money is a liability of the central bank. It is available to the public in the form of cash. It is also available to commercial banks in the form of central bank reserves. Private money mainly takes the form of deposits in commercial banks – that is, claims on commercial banks held by the public. This ‘commercial bank money’ is created when commercial banks make loans to households and companies – referred to as the ‘real economy’.