British lawmakers have rejected the proposal to roll out a Central Bank Digital Currency (CBDC) dubbed ‘Britcoin’, citing significant risks to the region’s economy.
A report published by the Lords Economic Affairs Committee notes that the introduction of a CBDC lacks a convincing case at the moment and poses threats to financial stability and user privacy.
The committee’s chair, Lord Forsyth, revealed that witnesses who were probed on the use cases of the currency failed to give a compelling reason. He stated that the concept appears to offer minimal rewards.
“The introduction of a UK central bank digital currency would have far-reaching consequences for households, businesses, and the monetary system. We found the potential benefits of a digital pound, as set out by the Bank of England, to be overstated or achievable through less risky alternatives,” said Forsyth.
The committee’s findings also indicated that a CBDC poses threats to individual accounts in the wake of increased cyber security concerns alongside the possibility of attacks from enemy nations and bad actors.
However, the lawmakers acknowledged that a digital currency would have several benefits like enhancing efficiency in trading and settlement alongside security.
Bank of England exploring possible CBDC launch
The rejection comes as the Bank of England (BoE) explores introducing a digital currency. In November last year, BoE stated that it would consult in 2022 whether to move forward with the CBDC introduction plans alongside the finance ministry.
However, all is not lost for the CBDC roll out since the members of parliament recommended establishing a joint task force to lead consultations on the use cases for a wholesale CBDC.
Although BoE seems to be open to the idea of a digital pound, several officials from the institution have expressed criticism of cryptocurrencies. As reported by Finbold, Bank of England governor Andrew Bailey suggested that the rising popularity of cryptocurrencies could be a warning sign as investors look for value in digital assets. He stated that digital currencies like Bitcoin lack an intrinsic value, posing risks for investors.
Besides BoE, other global banks are also increasingly moving closer to having operational CBDC. For instance, on Thursday, January 13, the Swiss National Bank announced it has successfully deployed a digital currency to settle transactions in partnership with five different commercial banks.