The Treasury Committee has argued that the benefits of the new asset promoted by the central bank did not outweigh their concerns of overall confidentiality and financial risks.
The BoE’s deputy governor for financial stability Jon Cunliffe said last week (27 November), that a digital pound would likely be needed by 2030.
Cunliffe argued a digital currency would help the UK to keep up with other countries developments’ around traditional currency alternatives and maintain the public’s confidence in money generally.
The government has been reviewing the plausibility and application of a the implementation of a retail Central Bank Digital Currency (CBDC) since last year, when it opened an inquiry into the crypto-asset industry.
In the latest statement, the committee agreed it was important for the BoE and Treasury to remain “open to modernising the use of money in a way which keeps pace with technology while preserving economic stability and individual security”.
But chair Harriett Baldwin said this had to be done while making it “clearly evidenced that a retail digital pound will provide benefits to the UK economy without increasing risks or leading to unmanageable costs before any decision is taken to introduce it into our financial system”.
Baldwin added that the authorities needed to remain mindful of the unbanked portion of the public.
“We must also keep a close eye on ensuring that any retail digital pound does not worsen financial exclusion for those reliant on physical cash. The digitisation of money cannot, in any way, leave those people behind,” she said.
“While we support the Bank of England’s plan to continue working on the design of a potential retail digital pound, I would urge them to proceed with caution and maintain a genuinely open mind as to whether one is actually needed.”
She touched on concerns around how the authorities would use digital pound holders’ personal data, as well as the and the possibility of households pulling savings from traditional accounts and converting them in periods of bank stress.
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According to the committee, it had “registered concerns regarding estimates that a steady switching of some bank deposits into retail digital pounds could increase the interest rates on bank loans by 0.8 percentage points or more”.
Baldwin said that in order to mitigate these risks, the MPs were suggesting a “a smaller limit” on the value of retail digital pounds each individual is initially allowed than the £10,000-£20,000 limit by the Bank of England and Treasury suggested in its consultation.
“MPs urge the government to alleviate privacy concerns that organisations or the government could misuse personal data generated by the introduction of a retail digital pound, for example to monitor or control how users spend their money,” Baldwin added.
“These concerns could be mitigated through robust regulation and legislated protections related to the ability of any future government to access people’s data.”
