An all-party committee of the United Kingdom’s House of Lords warned about the concerns of financial instability from the proposed launch of a central bank digital currency (CBDC). It warned that the launch of such a digital currency might cause a run on the banks in economic downturns.
The Economic Affairs Committee admitted some of the advantages of a CBDC. But, it found no convincing case for launching a digital version of the pound sterling, highlighting that it could pose ‘significant risks’ to the country.
“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,” Lord Forsyth of Drumlean, the Chair of the Committee, said.
“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.”
Possibility of a CBDC Launch
The British central bank already joined a consortium of other top global counterparts to study and research the feasibility of launching a digital alternative of fiat currency.
The UK government’s ambition to bring such a CBDC became more prominent when Chancellor Rishi Sunak formed a joined task force of the HM Treasury and the Bank of England to better explore the possibilities of a CBDC. He even unofficially termed the digital currency, Britcoin.
The latest feedback from the parliamentary committee questions the privacy and state surveillance with such a digital fiat. In addition, it is concerned with security risks, considering both attacks on individual accounts and the underlying CBDC blockchain.
Meanwhile, the upper chamber of the House of Commons started to look into the prospect of the launch of a CBDC.
“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,” Lord Forsyth added.
