Amid rapid development in the digital currency landscape, legislators in the British House of Commons are mulling over the introduction of a retail digital pound. While acknowledging the potential benefits of a central bank digital currency, the lawmakers stressed the need to assess this initiative’s attendant risks and costs.
House Of Commons Assess CBDC Costs
The United Kingdom’s House of Commons Parliamentary Committee has taken an essential step toward investigating the potential of a digital pound. According to reports, the Committee has asked the Bank of England (BoE) and the Treasury to look into the benefits of introducing this virtual currency.
Furthermore, a recent report from the Treasury Committee emphasized the substantial costs associated with laying the groundwork and conducting trials for a UK central bank digital currency (CBDC). To ensure clarity and accountability, the Committee proposed a new method beginning in 2024 to outline these specific costs as a separate entry in the annual report and accounts.
This move aims to increase transparency in the expenses involved with CBDC initiatives. The Committee’s request for additional research reflects a strong desire to understand the potential benefits of a digital pound fully.
They also acknowledged the importance of conducting extensive research before introducing a digital currency.
Addressing Privacy Concerns
Meanwhile, ongoing tests of a British Pound CBDC have revealed several possible benefits regarding issuance, distribution, and privacy. Nevertheless, due to the significant investment required, the Committee is wary of giving the green light for the official introduction.
According to the Committee, it has yet to prove whether the benefits outweigh the risks. In addition, the Treasury Select Committee has raised concerns about this digital currency’s market stability and privacy implications.
They propose lowering the initial value limits on retail digital pounds to prevent bank runs. Furthermore, the Committee expressed its user privacy concerns and called for strict measures to avoid excessive surveillance due to currency digitization.
They advocate for legislation that limits the government or the Bank of England’s use of digital pound information. Before considering the introduction of a retail digital pound, committee chair Harriett Baldwin deemed it necessary to provide conclusive proof demonstrating its positive impact on the UK economy while effectively managing risks and costs.
Meanwhile, the Committee urged the BoE not to overestimate the capabilities of a digital pound, warning against viewing it as a panacea for problems beyond its scope. It emphasized the importance of preventing the introduction of a digital pound from worsening the existing financial exclusion trends in the fiat economy.
While the BoE and HM Treasury recognize the future necessity of a digital pound, they also establish the need for extensive groundwork before pledging to its infrastructure. Several factors, including the decline in the use of physical currency, the rise of privately issued digital money, and global CBDC advancements, will impact their decision-making process following the design phase for the digital pound launch.