British lawmakers said on Thursday that the digital pound used by consumers could harm financial stability, raise the cost of loans and destroy privacy, although a version for wholesale use in the financial sector is under evaluation. demands.
Britain’s central bank and finance ministry said in November that they would consult this year on how to proceed on a central bank digital currency (CBDC), to be introduced as soon as possible after 2025.
Central banks around the world have intensified work on CBDCs to keep the private sector from dominating digital payments as the use of cash diminishes. The prospect of a widely used cryptocurrency released by Big Tech has also fueled such efforts.
A committee of the House of Lords, the unelected upper house of parliament, said e-pounds used by households and businesses for everyday payments could allow people to transfer cash from commercial bank accounts to digital wallets.
This could exacerbate financial instability in times of economic stress and increase borrowing costs as a major source of funding for lenders would dry up, it said.
A digital pound could also harm privacy, the report said, by allowing central banks to monitor spending.
“We were really concerned about the many risks posed by the introduction of CBDCs,” Michael Forsyth, chairman of the Economic Affairs Committee, told Reuters.
Pointing to regulation by big tech firms as a better tool to address the threat of crypto, Forsythe said, many of the benefits for consumers “could be derived from alternative methods with less risk.”
However, a wholesale CBDC used to transfer large sums of money, which could make trading and settlement of securities more efficient, the report said. It said Britain’s central bank and finance ministry should consider the benefits of expanding the existing settlement system.
The report added that any decision to launch the e-pound should be finalized by the UK Parliament, calling on lawmakers to vote on their governance as well.
CBDCs will have “far-reaching consequences for households, businesses and the monetary system,” Forsyth said. “It needs to be approved by Parliament.”
© Thomson Reuters 2022
Cryptocurrency is an unregulated digital currency, is not legal tender and is subject to market risks. The information in this article is not intended to constitute financial advice, trading advice or any other advice or a recommendation of any kind offered or endorsed by NDTV. NDTV shall not be liable for any loss arising out of any investment based on any alleged recommendation, forecast or any other information contained in the article.
Get the latest from the Consumer Electronics Show on Gadgets 360 on our CES 2022 hub.