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A United Kingdom’s House of Lords Committee has come to the conclusion that there is “no convincing case” for the kingdom to develop a central bank digital currency (CBDC).
Set up in September of 2021 to explore how a CBDC affects British monetary policy, the financial sector and the role of the Bank of England, the report published by the Economic Affairs Committee on Thursday states that the negatives by far outweigh the positives. It reads:
“While a CBDC may provide some advantages, it could present significant challenges for financial stability and the protection of privacy.”
According to the committee it would be “inevitable” that people would transfer money from their bank accounts into CBDC wallets and the process needs to be thought through very carefully. There were questions raised about the amount of CBDC people can hold and on the matter of how to avoid financial instability which could be exacerbated by people making deposits with digital currencies only.
Its monthslong investigation also shows that the Bank of England prefers to steer away from “controversial debates on privacy” if it were to add features to the CBDC to prevent it for illicit use.
“While there are design options that would provide some privacy safeguards, technical specifications alone may be insufficient to counter public concern over the risk of state surveillance,” the committee noted.
Chair of the Committee, Lord Forsyth of Drumlean, concluded:
[The benefits of a CBDC are] overstated or achievable through less risky alternatives.”