UK lawmakers call for caution in retail digital pound rollout

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UK lawmakers recommend taking a cautious stance on the implementation of a retail digital pound. They emphasize the importance of striking a balance between technological advances and potential downsides.

Members of the Treasury Select Committee Express reservations regarding the possible launch of a retail digital book, highlighting the need for careful consideration before execution. While recognizing the potential benefits in terms of innovation, the committee urged the Bank of England (BoE) and the Treasury to carefully assess the need for such a measure, taking into account both the costs and associated risks.

In the meantime, the committee report recommends imposing lower initial limits on the value of retail e-books to mitigate the risk of potential bank runs amid market instability. This specific precautionary measure aims to deter large transfers of deposits to digital wallets, which could increase the risk of bank failure and increase lending costs.

Screenshot of the Treasury Committee report Source: British Parliament

The report addresses privacy concerns and recommends that any legislation introducing a digital pound should strictly limit the government or BoE’s use of the data. The commission stressed the importance of protecting user privacy and ensuring that the digitalization of currency does not allow unwarranted surveillance.

The report suggests that if legislation is introduced to introduce a digital pound, it should expressly prevent the Government and the Bank of England from using data acquired through the digital pound for purposes beyond those already authorized by law enforcement.

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Committee chair Harriett Baldwin highlighted the need for compelling evidence before considering the introduction of a retail e-book. She stressed the need to clearly demonstrate that its implementation would benefit the UK economy without increasing risks or incurring unmanageable costs, saying the decision to integrate it into the financial system should depend on a full assessment of these factors.

While endorsing the Bank of England’s current design efforts, British lawmakers urged transparency regarding the project’s costs. Baldwin highlighted the need for a concise cost-benefit analysis to ensure the introduction of a retail digital pound aligns with the broader goals of economic stability and financial inclusion.

Meanwhile, investment managers in the UK are receiving regulatory support to leverage blockchain technology to tokenize funds, breaking away from conventional record-keeping systems.

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