British lawmakers are cautioning against hastily introducing a digital pound for retail use. They emphasize the importance of striking a balance between technological progress and potential downsides.
Members of the Treasury Select Committee have expressed reservations about the potential launch of a retail digital pound, highlighting the need for careful examination before moving forward.
In the meantime, the committee’s report suggests implementing lower initial limits on the value of retail digital pounds to reduce the risk of possible bank runs during periods of market instability. This specific precaution aims to discourage large transfers of deposits into digital wallets, which could increase the risk of bank failures and raise loan costs.
The committee is urging the Bank of England (BoE) and the Treasury to thoroughly evaluate the necessity of such a move, taking into account both the associated costs and risks.
The report focused on privacy issues and suggested that if there’s a law to bring in a digital pound, it must restrict the government and the Bank of England from using digital pound data for anything other than what’s already allowed for law enforcement. The committee emphasized safeguarding user privacy and making sure the shift to digital currency doesn’t lead to unnecessary surveillance.
Committee chair Harriett Baldwin stressed the need for compelling evidence before contemplating the introduction of a retail digital pound. She emphasized the requirement for clear proof that its implementation would benefit the UK economy without escalating risks or incurring unmanageable costs, asserting that the decision to integrate it into the financial system should hinge on a comprehensive evaluation of these factors.
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