MPs Warn Personal Privacy Dangers with Digital Pound
On Saturday, MPs warned that the digital pound could potentially cause a “risk of financial stability and personal privacy.”
The House of Commons Treasury Committee said, “The Bank of England and HM Treasury should continue exploring a central bank digital currency.”
They urged both to “proceed with caution” due to the “significant risks and challenges.”
The idea has been in the system since February, and designs are being created for the new system.
The aim is to create an electronic alternative to cash that is risk-free and used universally.
The design time frame is estimated to continue into the middle of the decade, with a possibility of the currency launching before 2030.
The Central Bank Digital Currency would be distributed by the Bank of England and operate like banknotes.
Harriett Baldwin, Conservative MP and committee chair, said: “It must be 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.”
Officials and politicians are yet to conclude that CBDC is convincing enough to outweigh the risk they could construct.
“The extent of these benefits is unclear, however. Nor is it yet clear that a digital pound is the only (or best) means of achieving them,” they said.
The committee noted the Hazards if people transfer large amounts of savings into digital pounds.
It could end up speeding up the extinction of physical cash, which some still depend on.
It could cause interest rates on bank loans to increase by 0.8% or more.
Baldwin added, “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 can’t, in any way, leave those people behind.”
Some are concerned with the potential of government snooping on digital pounds.
The Treasury and Bank of England said, “We have always been clear that a digital pound would only ever be introduced alongside cash and that protecting individual privacy is paramount in any design.”
According to the Atlantic Council, 100 countries around the world are exploring digital currency, while 11 have already launched one.
In a statement on Saturday, the Treasury and Bank of England said,
“We will also shortly publish the response to our consultation paper setting out the next steps.
