According to UK lawmakers, a central bank digital currency (CBDC) will likely increase the cost of borrowing while hurting financial stability. They insist that the touted potential benefits of a digital pound are overstated.
erosion of privacy
UK lawmakers have said using a central bank digital currency with regular payments could potentially hurt financial stability and increase the cost of borrowing, a report says. Additionally, they insist that increasing use of CBDC could also allow the central bank to monitor spending, thus undermining privacy.
According to a Reuters report, lawmakers believe the benefits of CBDC may have been overstated and that there are other ways the UK can address the cryptocurrency threat. One of the lawmakers cited in the report is Michael Forsyth. He said:
We were really concerned about a number of risks associated with launching a CBDC.
Forsyth, chair of the economics committee, also said the touted benefits of a CBDC have been “overstated.” He suggested that these benefits can still be achieved with a less risky alternative such as regulating crypto-issuing tech companies.
The legislature wants parliament to have a say
Nevertheless, in a report submitted to the UK Parliament by Forsyth’s committee, lawmakers recognize that a wholesale CBDC, capable of moving large funds, will potentially lead to more efficient securities trading and settlement. However, lawmakers still want the central bank and Treasury to weigh the benefits of using CBDC versus expanding the existing system.
Forsyth is quoted in the report as saying lawmakers must have a say before the Bank of England and the UK Treasury are allowed to proceed with CBDC issuance.
“[A CBDC could have] far-reaching consequences for households, companies and the monetary system. That has to be approved by Parliament,” Forsyth is quoted as saying.
Do you agree with UK lawmakers’ views on CBDCs? Tell us what you think in the comments below.
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