UK Economic Affairs Committee unconvinced by prospect of retail CBDC

The House of Lords Economic Affairs Committee — an investigative governing body representing the economic interests of the United Kingdom — has actually launched a main report examining the pertinence of a government-issued reserve bank digital currency (CDBC).

Titled “Central bank digital currencies: a solution in search of a problem?,” the 52-page publication covers a list of locations in relation to domestic CBDC endeavours, and routinely points out the initial research study taskforce developed by Bank of England and HM Treasury in April 2020.

Over 50 people, consisting of economists, university teachers from elite organizations, handling directors of big corporations, in addition to whole companies spoken with on the expediency and subtleties of a digital possession in composed and oral formats at panel conversations, hearings and online submissions in the months prior to its release.

Andreessen Horowitz, the Blockchain Association and Crypto UK sent composed appraisals, while Charlotte Hogg, CEO at Visa Europe, Andrew Bailey, Governor at the Bank of England, Ripple and Standard Chartered offered spoken accounts.

The frustrating conclusion of the report identified that there is no instant requirement for the U.K. to pursue first-mover benefit in the CBDC area, arguing that a number of concerns and difficulties are still popular, consisting of geopolitical impacts, Meta’s large user network, China’s development and cyber security in what might end up being a “vulnerable single point of failure”, to name a few.

In addition, it was specified that inappropriate preparation and negligent security preventative measures might have “far-reaching consequences” and “pose significant risks” reliant the possession’s infrastructural style and intent of use in the general public domain.

The 13-member committee, chaired by Lord Forsyth of Drumlean, concluded:

“While a CBDC may provide some advantages on speed of settlement and cheaper and faster cross-border payments, it would present significant challenges for financial stability and the protection of privacy.”

Speaking on China, the committee kept in mind that developments to take on the conventional economic facilities might “erode the US dollar’s sanctions leverage, helping countries seeking to evade economic sanctions to bypass US dollar-dominated systems such as SWIFT”.

Related: UK Treasury and central bank will consult on CBDC, potentially launching by 2030

It also raised concerns that this could have wider consequences in the European markets, specifically in terms of the strength and adoption of the British sterling and euro.

The UK would derive most long-term benefit by ensuring global standards and rules on governance, privacy, security and interoperability are compatible with the national interests and values of the UK and its allies.

The Joint Taskforce overseen by the Bank of England and HM Treasury is expected to publish their findings later this year, having previously stated that a digital pound could be minted into virtual circulation in the second half of this decade.

The House of Lords committee has stated that “Parliament need to have the chance to vote on any decision” following the results of the Joint Taskforce, and has issued a 10-point public questionnaire to further investigate the matter.