MPs have cautioned that the formation of a state-supported "digital pound" should be done with care.
The Treasury Committee stated in a report that, if launched, the advantages of the currency are not obvious yet and measures would need to be implemented to ensure money accessibility and confidentiality.
Since February, the Bank of England and the Treasury have been discussing the concept.
They are in the process of devising what a system like this could be like.
The design phase is anticipated to go on until the middle of the decade, with the potential for the currency to be implemented prior to 2030.
A digital currency from a central bank that could be used by families and businesses would be an additional option alongside cash and bank deposits, and the specifics are still being determined.
The Bank of England would directly provide the CBDC, similar to issuing banknotes.
This implies that people would be ensured the same level of security they now have with their cash, compared to cryptocurrencies, which often exhibit fluctuations in value and are operated by private entities.
Members of the Treasury Committee noted that there could be advantages to the system, such as stimulating innovation in payments as well as enhancing the UK's competitive edge in the international arena.
Questions have been raised about whether the benefits exceed the potential dangers and expenses.
The extent of potential advantages is not certain yet. In addition, it is still not clear if a digital pound is the only or most effective way to realize them, according to the statement.
The report cautioned that the implementation of the new currency may result in extensive trackability, providing officials entry to an abundance of information regarding individuals, which could be abused.
The committee cautioned that the potential launch of a CBDC could hasten the disappearance of physical cash, a payment method employed by many people.
Harriett Baldwin, head of the committee, noted that prior to considering introducing a CBDC into the UK economy its advantages must be demonstrated.
She emphasised the importance of monitoring to make sure that the creation of a digital form of sterling does not have a negative impact on access to money for those who rely on physical cash. She made it clear that digitization should not cause anyone to be left out.
Hundreds of bank branches in the UK have been shuttered in recent years, making it harder to acquire cash and other banking services.
Approximately 130 countries globally are looking into the possibilities of Central Bank Digital Currencies (CBDCs), according to the Atlantic Council think tank.
Eleven countries, among which Nigeria and Jamaica are included, have already implemented a program, while an additional twenty-one nations are conducting a test run, such as China, Australia, and South Africa.
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