The UK’s Parliamentary Committee, specifically the UK House of Commons, has recommended additional evaluations on the feasibility and risks associated with the introduction of a digital pound.
Expressing concerns over the substantial investment required for an official launch, the committee emphasized the need for a thorough cost-benefit analysis, stating;
“It is not clear at this juncture whether the advantages are likely to outweigh these potential risks.”
Additionally, the House of Commons Treasury Committee report highlighted the considerable expenses incurred by the Bank of England and Treasury during the groundwork and testing phases of a central bank digital currency (CBDC).
UK House of Commons Advances Oversight: Proposes Transparent Reporting of CBDC Costs
To ensure transparency, the committee proposed a distinct line item in the annual report and accounts, starting from 2024, detailing the costs related to CBDC initiatives. The objective is to maintain control over these costs and prevent unnecessary expenditure on a digital pound that may not progress to implementation.
Although ongoing tests of an English CBDC have revealed various benefits related to issuance, distribution, and privacy, the committee remains cautious about the financial commitment required for an official launch.
Digital Pound Pathway: Challenges and Preparations Ahead
Notably, it urged the Bank of England to refrain from suggesting that a digital pound can solve issues beyond its capabilities and emphasized the importance of avoiding exacerbation of financial exclusion, a concern inherited from the fiat economy.
However, while recognizing the future necessity of a digital pound, both the Bank of England and HM Treasury acknowledged the need for additional preparatory work before committing to building the necessary infrastructure.
Furthermore, factors such as the decreasing use of physical currency, the rise of privately issued digital currencies, and international developments in CBDCs will play a role in influencing the decision to proceed with the digital pound after the design phase.