The Bank of England (BoE) is facing scrutiny from the UK Parliament's Treasury Committee regarding the potential introduction of a state-backed digital pound, commonly referred to as 'Britcoin.' The committee has raised concerns about the risks to the banking system and privacy that may outweigh the benefits of a digital currency. They have urged the central bank to carefully consider whether a digital pound is necessary and to proceed with caution.
The committee has also suggested implementing measures such as lowering the limit on the amount of digital pounds consumers can hold. These measures aim to mitigate potential risks and ensure the stability of the financial system.
In response to the concerns raised by lawmakers, the Bank of England and HM Treasury have published a joint response to the consultation on a UK retail central bank digital currency (CBDC). The response does not confirm whether or not a digital pound will be introduced, but it provides an update on the proposed approach and next steps. Over 50,000 responses were received during the consultation, with privacy being a key concern among respondents. The Bank of England and HM Treasury emphasize the importance of building public trust and addressing privacy concerns to ensure the successful adoption of a digital pound. The decision on whether or not to begin the build phase of a digital pound will be made after the conclusion of the design phase, which is expected to take place in 2025/2026. The Bank of England and HM Treasury will continue to collaborate globally and monitor findings related to CBDCs abroad. Ongoing public-private partnerships and engagement with stakeholders will be crucial for the long-term development and adoption of a digital pound.
This development adds another layer of complexity to the BoE's stance on the value of the British pound. While the central bank has been urged to maintain a strong position on the currency to avoid negative economic impacts, the question of introducing a digital pound introduces new considerations and challenges.
Source: Bloomberg [99b4db9b], JD Supra [c5a2458a]
