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The House of Lords Economic Affairs Committee, the investigative governing body representing UK economic interests, has released an official Report Evaluate the relevance of government-issued central bank digital currencies (CDBCs).
The 52-page publication titled “Central Bank Digital Currencies: Finding Solutions to Problems?” covers a range of areas relevant to domestic CBDC efforts and is regularly cited Preliminary research working group established by the Bank of England and HM Treasury in April 2020.
More than 50 individuals, including financial experts, university professors at elite institutions, managing directors of large companies, and entire organizations, have written and spoken in writing and orally about the viability and nuances of digital assets. group discussion, hearings and online submissions months ahead of its release.
Andreessen Horowitz, Blockchain Association and Crypto UK submitted written assessments, while Visa Europe CEO Charlotte Hogg, Bank of England, Ripple and Standard Chartered Governor Andrew Bailey provided oral presentations.
The report’s overwhelming conclusions determined there was no immediate need for the UK to gain a first-mover advantage in the CBDC space, arguing that a number of issues and challenges remain salient, including geopolitical influence, Meta’s large user network, Chinese innovation and cybersecurity could become “vulnerable” single point of failure” etc.
In addition, inappropriate planning and careless safety precautions can have “profound consequences” and “pose a significant risk” depending on the asset’s infrastructure design and the intended use of the public domain.
The 13-member committee, chaired by Lord Forsyth of Drumlean, concluded:
“While a CBDC may offer some advantages in terms of settlement speed and cheaper, faster cross-border payments, it will pose significant challenges to financial stability and privacy protection.”
Referring to China, the committee noted that advances in competition with traditional economic infrastructure could “reduce the US dollar’s sanctions leverage, helping countries seeking to evade economic sanctions to bypass US dollar-dominated systems such as SWIFT”.
related: UK Treasury and Central Bank to negotiate CBDC, likely to launch in 2030
It also raised concerns that this could have wider implications for European markets, particularly in relation to the strength and adoption of the pound and euro.
The UK will have the greatest long-term benefit by ensuring that global standards and rules on governance, privacy, security and interoperability are aligned with the national interests and values of the UK and its allies.
A joint task force overseen by the Bank of England and the UK Treasury is expected to publish their findings later this year, having previously said a digital pound could be put into virtual circulation by the second half of the century.
Following the results of the joint working group, “Parliament should have the opportunity to vote on any final decision”, the upper house committee said, and released a 10-point public questionnaire to investigate the matter further.
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