British lawmakers are urging a cautious stance on implementing a retail digital pound. They highlight the importance of finding a balance between technological advances and possible drawbacks.
Members of the Treasury Select Committee have voiced reservations about the possible launch of a retail digital pound, underscoring the need for close examination before implementation. Despite recognizing potential advantages in terms of innovation, the committee has urged the Bank of England (BoE) and the Treasury to thoroughly assess the need for such a step, considering both the associated costs and risks.
Meanwhile, the committee's report recommends imposing lower initial limits on the value of retail digital pounds to alleviate the risk of potential bank runs amid market instability. This specific precautionary measure is intended to deter significant transfers of deposits to digital wallets, which could increase the risk of bank failures and raise borrowing costs.
The report addressed privacy concerns and recommended that any legislation introducing a digital pound should strictly limit the use of data by the government or the Bank of England. The committee highlighted the importance of protecting user privacy and ensuring that currency digitization does not allow for unwarranted surveillance.
The report proposes that, if legislation is passed to introduce a digital pound, the Government and the Bank of England should be expressly limited from using data acquired through the digital pound for purposes beyond those already authorized to enforce the law.
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Committee chair Harriett Baldwin highlighted the need for compelling evidence before contemplating the introduction of a retail digital pound. She stressed the need to clearly demonstrate that its implementation would benefit the UK economy without increasing risks or incurring unmanageable costs, stating that the decision to integrate it into the financial system should depend on a comprehensive assessment of these factors.
While supporting the Bank of England's current design efforts, UK lawmakers urged transparency regarding project costs. Baldwin emphasized the need for a concise cost-benefit analysis to ensure the introduction of a retail digital pound aligns with broader goals of economic stability and financial inclusion.
Meanwhile, investment managers in the UK are receive regulatory support to leverage blockchain technology tokenize funds, breaking with conventional record-keeping systems.
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