CBDC can provide certain advantages and at the same time create serious problems for financial stability, as well as the protection of privacy. This conclusion is contained in report House of Lords Economic Affairs Committee.
“The concept comes with a lot of risk for little reward. The potential benefits of the digital pound are exaggerated or achievable with less risky alternatives.”, – said the chairman of the committee, Lord Michael Bruce Forsythe.
The digital pound can lead to an outflow of funds from bank accounts to e-wallets. This could increase the cost of borrowing and undermine financial stability during a crisis, the document says.
The CBDC also poses security challenges – both individual accounts and the centralized ledger as a whole can become a target for malicious attacks. For this reason, the national digital currency system must adapt to reflect threats, including those coming from quantum computing.
A wholesale CBDC option may improve the efficiency of securities settlement and trading, however further research and experimentation is required.
Legislators did not rule out that the arguments in favor of the digital pound may change in the future. The government and the Bank of England need to work on the formation of global standards, in particular, on aspects of privacy, security and operational standards.
Parliament is convinced that legislators should have the final say in any decision to launch a digital pound.
Recall that in April 2021, the Bank of England and HM Treasury formed a working group on CBDC.
In September, the agencies set up two forums with representatives from Visa, Mastercard, SWIFT, PayPal, Google and others to explore various aspects of the launch of the digital pound. In October, Ripple joined the initiative.
Earlier, the chief economist of the Bank of England, Andrew Haldane, suggested that the emergence of national digital currencies would reduce the risks of financial crises.
According to the poll, only 24% of Britons supported the introduction of a digital pound. The greatest concern among citizens is the threat of hacker attacks and violation of privacy.
CBDC can provide certain advantages and at the same time create serious problems for financial stability, as well as the protection of privacy. This conclusion is contained in report House of Lords Economic Affairs Committee.
“The concept comes with a lot of risk for little reward. The potential benefits of the digital pound are exaggerated or achievable with less risky alternatives.”, – said the chairman of the committee, Lord Michael Bruce Forsythe.
The digital pound can lead to an outflow of funds from bank accounts to e-wallets. This could increase the cost of borrowing and undermine financial stability during a crisis, the document says.
The CBDC also poses security challenges – both individual accounts and the centralized ledger as a whole can become a target for malicious attacks. For this reason, the national digital currency system must adapt to reflect threats, including those coming from quantum computing.
A wholesale CBDC option may improve the efficiency of securities settlement and trading, however further research and experimentation is required.
Legislators did not rule out that the arguments in favor of the digital pound may change in the future. The government and the Bank of England need to work on the formation of global standards, in particular, on aspects of privacy, security and operational standards.
Parliament is convinced that legislators should have the final say in any decision to launch a digital pound.
Recall that in April 2021, the Bank of England and HM Treasury formed a working group on CBDC.
In September, the agencies set up two forums with representatives from Visa, Mastercard, SWIFT, PayPal, Google and others to explore various aspects of the launch of the digital pound. In October, Ripple joined the initiative.
Earlier, the chief economist of the Bank of England, Andrew Haldane, suggested that the emergence of national digital currencies would reduce the risks of financial crises.
According to the poll, only 24% of Britons supported the introduction of a digital pound. The greatest concern among citizens is the threat of hacker attacks and violation of privacy.
