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A Committee of peers in the House of Lords has concluded that there is no convincing case for the creation of a central bank digital currency in the UK.
The Economic Affairs Committee found that while a CBDC may provide some advantages, it could present significant challenges for financial stability and the protection of privacy.
The Bank of England and HM Treasury have been actively pursuing the case for a CBDC, dubbed Britcoin, due to the declining use of cash and the threats to monetary sovereignty posed by private digital currencies.
The upper chamber of the House of Commons commenced its inquiry into the issue in November, taking evidence from the Bank of England and senior banking officials.
Lord Forsyth of Drumlean, Committe Chair, comments: “We took evidence from a variety of witnesses and none of them were able to give us a compelling reason for why the UK needed a central bank digital currency. The concept seems to present a lot of risk for very little reward. We concluded that the idea was a solution in search of a problem.”
In publishing its report, the Committee expresses a view that the creation of a retail CBDC could lead to a run on bank deposits in times of economic stress and could also draw the Bank of England into controversial debates on privacy and state surveillance.
Security risks, both from the pilfering of individual accounts and hostile attacks on the centralised CBDC ledger, were also highlighted.
States Forsyth: “The introduction of a UK central bank digital currency would have far-reaching consequences for households, businesses, and the monetary system. We found the potential benefits of a digital pound, as set out by the Bank of England, to be overstated or achievable through less risky alternatives.”
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