UK lawmakers urged to exercise caution over retail digital pound rollout

British lawmakers are taking a cautious approach to implementing a retail digital pound. They stress the importance of finding a balance between technological advances and potential drawbacks.

Members of the Treasury Select Committee have expressed their doubts about when the retail digital pound could be launched, and indicated that a thorough investigation is needed before it is killed. Although the committee recognizes the potential benefits of innovation, it urges the Bank of England (BoE) and the Treasury to carefully assess the need for such a move, taking into account the associated costs and risks.

In the interim, the committee's report recommends placing lower initial limits on retail digital pound prices to mitigate the risk of bank processes that may be affected by market volatility. This particular precautionary measure aims to prevent the transfer of large amounts of deposits to digital wallets, which could increase the risk of bank failure and raise borrowing costs.

The report explores privacy concerns and recommends that any legislation introducing a digital pound should strictly limit the use of data by the government or the BOE. The committee emphasized the importance of protecting user privacy and digitizing currency against undue surveillance.

The report suggests that the UK Government and the Bank of England should clearly limit the use of information obtained by Digital Pounds for purposes other than those permitted by law enforcement when the Digital Pound Act is introduced.

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Committee chair Harriet Baldwin emphasized the need for compelling evidence before considering introducing a retail digital pound. She emphasized the need for clear evidence that implementation would benefit the UK economy without increasing risk or incurring unmanageable costs, and explained that the decision to integrate it into the financial system should be based on a comprehensive assessment of these factors.

While the Bank of England has supported the current design efforts, UK lawmakers have urged transparency regarding project costs. Baldwin emphasized that a thorough cost-benefit analysis is needed to ensure that the introduction of the retail digital pound is consistent with the broader goals of economic stability and financial inclusion.

Meanwhile, investment managers in the UK are getting regulatory support for setting up funds using blockchain technology, moving away from traditional record-keeping systems.

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