The British Parliament and not the Bank of England must decide whether to set up state-funded digital currency because the move could have “serious consequences”, a well-known House of Lords committee warned Thursday.
Rejecting the many benefits of digital money provided by the central bank, a report by the House of Lords Economics Affairs Committee said the idea had some potential pitfalls, including privacy issues. It defined the concept as a “problem-solving approach to finding a problem”.
BoE, which formed a joint venture with Treasury last year we analyze the value and profitability of its digital currency, is one of the 90 central banks around the world exploring the concept.
The idea is to make a parallel to a digital banknote for people to buy goods and receive payments, linked directly to the central bank. It can compete with commercial banks, which already allow people to pay digitally using credit and debit cards, and other electronic payment methods, such as PayPal.
The BoE has said the digital currency is centralized can change trade power and cost reduction.
But a report by the committee, of which former BoE governor Mervyn King is also a member, found few reasons for such funding. “We have yet to find a satisfactory case for why the UK needs retailers [central bank digital currency]. ”
It warned that any government digital currency – especially those involving BoE accounts for people – “has significant implications for families, businesses and financial management for many years to come and could be at high risk depending on how they are designed”.
The report expressed concern that such funds could be used by the government to monitor public spending and to pay for savings, although Andrew Bailey, BoE governor, told the committee that it was not intended.
“The implementation of the monetary policy should not be a catalyst for the introduction of digital banking,” the report said.
It pointed out that there are risks to national security, with the risk of being disrupted by the enemy regime and the stability of the economic system.
For all these reasons, the report states that any move to reflect digital currency by the state must include the approval of all legislatures through the original legislation.
“We are deeply saddened, to be honest, I was a little disappointed by the evidence from the Treasury branch on the role of parliament in enacting this law. [central bank digital currency], “Lord Michael Forsyth, a Conservative colleague and chairman of the committee, told FT.
“When the Minister of Finance gave evidence, he did not reduce our concerns that this could be a matter for the Treasury and the Bank of England and to be considered part of. [BoE]’s bailiwick, “he added.
Central banks have repeatedly said that setting up their own digital currency may be threatened by those who are secretly backed by companies such as Meta, formerly Facebook. The report said government officials had failed to fully explain the causes.
The BoE declined to comment on the report.