UK Parliament Urges Bank of England to Explore Benefits of a Digital Pound
Summary:
The UK's House of Commons has requested the Bank of England and Treasury investigate into the benefits of initiating a digital pound. The development and trial of a central bank digital currency (CBDC) have incurred substantial costs, prompting the committee to call for increased transparency and cost management. The committee also expressed concern that a digital pound could amplify financial exclusion and advised against overstating its problem-solving capabilities. The Bank of England and Treasury acknowledge a future need for a digital pound, but commit to further groundwork before making the necessary infrastructure. Future decisions on this digital currency will take into account the declining use of physical cash, the arrival of privately-issued digital money, and global progress in CBDCs.
A committee in the UK Parliament's House of Commons has requested the Treasury and the Bank of England to undertake additional research on the potential benefits of launching a digital version of the British pound. A report from the Treasury Committee mentioned that substantial costs have been incurred in preparation and experimentation related to the establishment of a central bank digital currency (CBDC). The committee urged for increased transparency over these associated costs by incorporating a separate mention in annual financial reports starting from 2024, emphasising the need for the Treasury and Bank of England to manage these expenses to prevent unnecessary spending on a digital pound that may never be actualised.
The continuous trials involving a UK-based CBDC have revealed potential advantages pertaining to currency issuance, distribution, and privacy among others. Nevertheless, the committee expressed apprehension that an official launch could require substantial investment, questioning whether the prospective rewards would surpass these associated risks.
The committee appealed to the central bank of England to not prematurely declare that a digital pound can resolve issues beyond its capabilities and to ensure that a digital pound does not exacerbate the financial exclusion inherent within the present economy that uses fiat money.
Although the Treasury and the Bank of England acknowledge a potential requirement for a digital pound in the future, the commitment to build the necessary infrastructure calls for further groundwork. Aspects such as the diminishing use of physical cash, the advent of alternatively issued digital currencies and international advancements in CBDCs could impact the decision to move forward with the implementation of a digital pound subsequent to its design phase.
Published At
12/4/2023 7:28:52 AM
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