BoE and HMT Not Convinced on BritCoin CBDC

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    The Bank of England and HM Treasury created a Joint Taskforce to explore the potential of a ‘retail’ central bank digital currency (Britcoin CBDC). A retail CBDC is different to privately issued cryptocurrencies such as Bitcoin. Instead, it would be a form of electronic money issued by the Bank of England that could be used by households and businesses to make everyday payments—in essence a ‘digital banknote’.

    Over 90 central banks are exploring CBDCs. In developed countries, there are two common motivations. First, central banks are concerned that big tech companies, such as Meta/Facebook, could issue their own digital currencies to the users of their vast networks, enabling them to accrue excessive market power. Second, many central banks are concerned by the decline in the use of physical cash, which some have said anchors public confidence in the monetary system.

    However, the introduction of a UK CBDC would have far-reaching consequences for households, businesses, and the monetary system for decades to come and may pose significant risks depending on how it is designed. These risks include state surveillance of people’s spending choices, financial instability as people convert bank deposits to CBDC during periods of economic stress, an increase in central bank power without sufficient scrutiny, and the creation of a centralised point of failure that would be a target for hostile nation state or criminal actors.

    Overall conclusion

    We have yet to hear a convincing case for why the UK needs a retail CBDC. While a CBDC may provide some advantages, it could present significant challenges for financial stability and the protection of privacy.

    Comment

    Thomas Cattee, head of white-collar crime at Gherson Solicitors comments:

    Some countries are well on the way to actually implementing a central bank digital currency (“CBDC”), and despite there being some talk of a Britcoin in the UK, it is positive to now see the UK is taking a cautious and measured approach. For the implementation of a UK CBDC could have far-reaching consequences; not least the potential for increased state surveillance on individual spending and encroachment on individual privacy. It is reassuring to now see these specific concerns being raised and debated. However, the UK is also sensibly taking a pragmatic approach and not closing the door to this initiative and has appreciated that there might be a case for a UK CBDC in the future.

    More Information

    The full PDF report is attached below.

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