The House of Commons Treasury Committee in the United Kingdom has urged the Bank of England and the Treasury to conduct more in-depth consultations to assess the advantages of introducing a digital pound. This recommendation comes in light of the substantial expenses incurred during the preliminary stages and testing of a potential central bank digital currency (CBDC).
According to a report from the committee, the exploratory work for a CBDC has been costly for both the Bank of England and the Treasury. The committee suggests that these institutions should maintain a dedicated line item for CBDC-related expenses in their annual reports and accounts starting from 2024, to enhance transparency regarding the costs:
“It is important that the Bank of England and Treasury keep control of these costs to avoid spending more than necessary on a digital pound that might not proceed to being built.”
The committee acknowledged the potential benefits of a CBDC, including improvements in issuance, distribution, and privacy. However, it expressed concerns about the substantial investment required for an official launch, questioning whether the benefits would justify the risks involved. The committee cautioned the Bank of England against overestimating the capabilities of a digital pound, particularly in terms of solving issues beyond its scope, and emphasized the importance of ensuring that a digital pound does not exacerbate financial exclusion, a problem already present in the fiat economy.
The Bank of England and HM Treasury recognize the potential need for a digital pound in the future, but they agree that more preparatory work is necessary before committing to build the required infrastructure. The decision to move forward with the launch of a digital pound, following the design phase, will likely be influenced by several factors. These include the declining use of physical cash, the rise of new forms of privately issued digital money, and global developments in the area of CBDCs.
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