Thank you to all those who contacted me about a central bank digital currency (CBDC).
With the rise of digital payments and with the EU, US and China exploring the use of CBDCs, it is right that the Bank of England looks at the case for a state-backed digital currency – a “digital pound” – to protect the integrity and sovereignty of the Bank of England, and the UK’s financial and monetary system.
At the same time, people have a number of concerns on this issue, including in relation to privacy, civil liberties and financial inclusion. It is therefore crucial that the Bank of England and the Government address several important questions before deciding on whether the potential benefits of establishing a CBDC outweigh the risks.
The Government needs to set out how it will ensure a digital pound guarantees the privacy of the public. People should not be forced to pay or hand over their data to tech companies, so the Government needs to make clear whether people will be able to freely access a digital pound from institutions such as the Post Office.
It is also crucial that the Government acts to ensure that a digital pound does not increase financial exclusion. Fewer face-to-face banking services and a lack of free access to cash already cuts off millions of people from the goods and services they need. The Government should guarantee that a CBDC will not undermine protections for cash infrastructure and that a digital pound will not replace physical money.
In addition, the Government needs to put measures in place to protect against the risk to households and businesses if large numbers withdrew money from commercial banks at once to put into a Government-backed digital pound.
The Government and Bank of England launched a consultation on a digital pound on 7 February 2023. This closed on 30 June. The Government says it is analysing the feedback received as part of this and will respond in due course. I hope that, when it does so, it will address the concerns people have and provide the guarantees required. I will continue to monitor this issue, keeping in mind the points raised by constituents.
