UK Economic Affairs Committee unconvinced by prospect of retail CBDC

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The House of Lords Economics Committee – an investigative governing body representing UK economic interests – has released an official report assessing the suitability of a government-issued central bank digital currency (CDBC) .

Titled “Central Bank Digital Currencies: A Solution in Search of a Problem?”, the 52-page publication covers a litany of areas related to national CBDC efforts and regularly cites the preliminary research working group established by the Bank of England and the UK Treasury April 2020.

More than 50 people, including financial experts, university professors from elite institutions, CEOs of major corporations, as well as entire organizations consulted on the feasibility and nuances of a digital asset in written formats and orals in panel discussions, auditions, and online submissions in the month before its release.

Andreessen Horowitz, the Blockchain Association and Crypto UK submitted written assessments, while Charlotte Hogg, CEO of Visa Europe, Andrew Bailey, Governor of the Bank of England, Ripple and Standard Chartered provided verbal debriefs.

The report’s overwhelming conclusion determined that there is no immediate need for the UK to fight for first-mover advantage in the CBDC space, arguing that a number of issues and challenges are important, including geopolitical influences, Meta’s vast network of users, China’s innovation and cybersecurity in what could become a “vulnerable single point of failure”, among others.

Additionally, it was stated that poor planning and negligent security precautions could have “significant consequences” and “pose significant risks” depending on the asset’s infrastructure design and intent. for use in the public domain.

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

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

Speaking on China, the committee noted that progress to compete with traditional economic infrastructure could “erode the leverage of U.S. dollar sanctions, helping countries seeking to evade economic sanctions to circumvent systems dominated by US dollar such as SWIFT”.

Related: UK Treasury and central bank to consult on CBDC, potentially launched by 2030

He also raised concerns that it could have wider implications for European markets, particularly in terms of the strength and adoption of the British pound and euro.

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

The joint task force overseen by the Bank of England and the UK Treasury is expected to release its findings later this year, having previously said a digital book could come into virtual circulation in the second half of this decade.

The House of Lords committee said “Parliament should be given the opportunity to vote on any final decision” following the results of the joint task force, and released a 10-point public questionnaire to further investigate the question.