British lords warn of a threat to financial stability and
Software

British lords warn of a threat to financial stability and the confidentiality of citizens’ operations posed by the digital pound

According to British MPs, the retail digital pound intended for ordinary citizens could affect financial stability, the privacy of transactions, and increase the cost of credit. That being said, the financial sector version deserves a lot more approval.

Source: PublicDomainPictures / pixabay.com

Source: PublicDomainPictures / pixabay.com

It is known that the UK Central Bank and the Treasury Department announced in November their intention to hold a series of consultations on the possible introduction of the Central Bank’s Digital Currency (CBDC). It can be submitted in 2025 at the earliest.

As the turnover of cash is decreasing, central banks worldwide are already examining the possibility of introducing their own digital currencies as a counterweight to decentralized crypto assets.

Nonetheless, the report by the relevant committee of the House of Lords of the UK Parliament stresses that the use of the digital pound by citizens and businesses for daily household transactions will result in an outflow of funds from commercial banks’ accounts into digital wallets. This leads to financial instability. In particular, the cost of borrowing for borrowers will rise, as the bank balances actually formed by the account holders are used up, namely today they are one of the most important sources of money for lending. In addition, the use of the digital pound could compromise the privacy of payments, as the technology behind it would theoretically allow the central bank to monitor all transactions.

Nevertheless, the MPs have recognized that CBDCs can become a convenient and secure tool for large transactions, so that their advantages for the later integration of the digital currency into the existing system of business transactions can be taken into account. The final say in resolving any digital pound-related issue rests with the UK Parliament.

About the author

Robbie Elmers

Robbie Elmers is a staff writer for Tech News Space, covering software, applications and services.

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