House of Lords Hesitant on Digital Pound
(10 January 2022 – United Kingdom) The Lords Economic Affairs Committee declared that the introduction of a central bank digital currency (CBDC) in the United Kingdom (UK)could pose “significant risks”.
A bank run during economic downturns is a genuine possibility if an official “Britcoin” digital currency were to be floated a committee of peers warned, however the Bank of England (BoE) remains undeterred.
The BoE is one of 90 reserve banks globally exploring whether they should introduce their own CBDCs. The committee admitted that it is important to further understand the details of a sovereign digital currency and encouraged the BoE’s taskforce to continue investigating the concept. The introduction of a UK CBDC would have far-reaching consequences for households, businesses, and the monetary system for decades to come and may pose significant risks depending on how it is designed the committee said in a report.
These risks include state surveillance of people’s spending choices, financial instability as people convert bank deposits to CBDC during periods of economic stress, an increase in central bank power without sufficient scrutiny, and the creation of a centralised point of failure that would be a target for hostile nation state or criminal actors.
“It seems the Lords Economic Affairs Committee is not too keen on the idea of Britcoin, but that won’t stop the Bank of England looking into it. It is “right” that the Lords committee highlights the risks of introducing a digital currency, but if the Bank of England doesn’t create a digital pound, the private sector might” stated AJ Bell Head of Investment Analysis, Laith Khalaf.
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