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House of Lords sees ‘no convincing case’ for UK CBDC

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Central bank digital currency (CBDC) can provide certain advantages and at the same time create serious problems for financial stability, as well as protection of privacy. The report of the Economic Affairs Committee of the House of Lords of Great Britain contained this conclusion.

“The concept seems to present a lot of risk for very little reward. We concluded that the idea was a solution in search of a problem”. Said the chairman of the committee, Lord Michael Bruce Forsyth.

Thus, the digital pound can lead to an outflow of funds from bank accounts to electronic wallets. This could increase the cost of borrowing and undermine financial stability during the crisis, the document says.

The national digital currency system must adapt to reflect threats

CBDC also creates security challenges – both individual accounts and the centralized registry; as a whole can become a target for malicious attacks. For this reason, the national digital currency system must adapt to reflect threats, including those emanating from quantum computing.

Furthermore, the wholesale CBDC option can improve the efficiency of settlements and securities trading. But further research and experiments are required. The Committee recommended that the working group consider scenarios for the use of wholesale CBDC along with retail.

Moreover, the legislators did not rule out that in the future the arguments in favor of the digital pound may change. The Government and the Bank of England need to engage in the formation of global standards. In particular, on aspects of confidentiality, security and operational standards.

Working group on CBDC

The parliament is convinced that legislators should have the decisive word when making any decision on the launch of the digital pound.

Recall that in April 2021, the Bank of England and Her Majesty’s Treasury formed a working group on CBDC. In September, the agencies created two forums with the participation of representatives of Visa, Mastercard, SWIFT, PayPal, Google and others to study various aspects of the launch of the digital pound. Later in October, Ripple joined the initiative.

In addition, according to the survey of Redfield & Wilton Strategies, only 24% of Britons supported the introduction of the digital pound. The greatest concern among citizens is the threat of hacker attacks and violation of privacy.

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