The Bank of England (BOE) has been recommended by a powerful commission in the UK Parliament to examine if a state-backed digital pound is indeed required, given the potential hazards to privacy and the banking system. The Treasury Committee recommended that the central bank act cautiously and take steps to reduce the dangers associated with “Bitcoin,” such as reducing the maximum quantity of digital pounds that individuals may possess. The panel, which included lawmakers from the major political parties in Parliament, came to the conclusion that it is unclear at this point if the advantages will likely outweigh the hazards.
According to the BOE, as more transactions shift online, a digital form of the pound will probably be required. While researching the possibility of creating a central bank digital currency (CBDC), the UK Treasury and BOE have not yet decided whether to move forward or not. The BOE stated that any new money would not be in circulation before the second half of the 2020s, and that a decision is not anticipated in the UK for at least two to three years.
There are worries that switching to CBDCs would lead to bank takeovers if customers began using digital pounds rather than regular deposits as a safe haven. Lawmakers and conspiracies have also expressed interest in privacy issues. The committee proposed that authorities take a more careful approach to the cap placed on people’s holdings of digital pounds and that they think about following up on the CBDC and creating laws that would guarantee robust privacy protections for the digital pound.