- By Shiona McCallum
- Technology reporter
MPs have warned that the development of a state-backed “digital pound” should be approached with caution.
The Treasury Board said in a report that the benefits of the currency are not yet clear and that if launched, there must be systems in place to protect access to cash and privacy.
They are currently designing what such a system would look like.
The design phase is expected to last until the middle of this decade and the coin could be launched before 2030.
A central bank digital currency (CBDC) for use by households and businesses would sit alongside cash and bank deposits, rather than replace them, but details are still being worked out.
CBDC will be issued directly by the Bank of England, just like banknotes.
This means people will have all the same safety and security they have with existing cash, as opposed to cryptocurrencies which have fluctuating values and are often run by private companies.
MPs on the Treasury Committee said the system had “a number of potential benefits”, including that it could help generate innovation in payments and help the UK improve its competitiveness Global.
But they said questions remain about whether the positive impact outweighs the risks and costs.
“However, the extent of these benefits remains unclear,” they said. Nor is it clear that a digital pound is the only (or best) means of achieving them.”
The report warns that the new currency could be highly trackable and give authorities access to lots of new data about people, which could be abused.
The Commission also warned that the introduction of CBDC could hasten the disappearance of physical cash, which many people still rely on.
The committee’s chair, Harriett Baldwin, said that the positives of CBDC for the UK economy would have to be proven before any decision was made on its introduction.
“We must also watch closely to ensure that any retail digital pound does not worsen the financial exclusion of those dependent on physical cash,” she said. The digitization of money cannot in any way abandon those people.”
Hundreds of bank branches across the UK have closed in recent years, making access to cash and banking services more difficult.
According to the report, about 130 countries around the world are exploring the potential of CBDC. Atlantic Council thinking tank.
So far, 11 countries including Nigeria and Jamaica have launched a project, and 21 countries including China, Australia and South Africa are piloting one.