According to UK lawmakers, a central bank digital currency (CBDC) is likely to increase the cost of borrowing while harming financial stability. They insist that the touted potential benefits of an e-book are overstated.
Erosion of privacy
UK lawmakers have said the use of a central bank digital currency in regular payments could potentially harm financial stability and increase the cost of borrowing, according to a report. Furthermore, they insist that the growing use of the CBDC could also allow the central bank to monitor spending and therefore infringe on privacy.
According to a Reuters report, lawmakers believe the benefits of the CBDC may have been overstated and that there are other ways the UK can counter the threat posed by cryptocurrencies. One of the lawmakers named in the report speaking out is Michael Forsyth. He said:
We were really concerned about a number of risks posed by the introduction of a CBDC.
Forsyth, who is the chairman of the Economic Affairs Committee, also said the touted benefits of having a CBDC had been “exaggerated”. He suggested that these benefits can still be achieved with a less risky alternative such as regulating cryptocurrency-issuing tech companies.
Lawmakers want Parliament to have a say
In a report tabled by the Forsyth Committee in the UK Parliament, lawmakers nevertheless acknowledge that a wholesale CBDC, which can be used to move large funds, will potentially lead to more efficient trading and settlement of securities. However, lawmakers still want the central bank and finance ministry to weigh the benefits of using the CBDC over expanding the existing system.
Forsyth is quoted in the report as saying lawmakers must have a say before the Bank of England and UK Treasury are allowed to proceed with CBDC issuance.
“[A CBDC could have] serious consequences for households, businesses and the monetary system. It has to be approved by parliament,” Forsyth said.
Do you agree with UK lawmakers’ view of CBDCs? Let us know what you think in the comments section below.
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