Tory MP Warns Downing Street A Centralised Digital Currency Could Risk Privacy
A Conservative MP has written to Prime Minister Rishi Sunak to raise concerns about what a centralised digital currency could mean for privacy after the Bank of England and Treasury have discussed how one could be implemented in the future.
In a letter to Sunak and Chancellor Jeremy Hunt, shared with PoliticsHome, Conservative Chair of the All-Party Parliamentary Group for Central Bank Digital Currencies (CBDC) Marcus Fysh asked when they would publish its response to a consultation on a Bank of England issued digital currency, which ended on 30th June 2023.
Fysh also expressed concern that a CBDC could put people's privacy at risk, and questioned its potential economic benefits.
A British CBDC, if introduced, would be a new form of sterling which could be issued by the Bank of England. Known informally as 'Britcoin', it would mimic the use of cash and would be held by consumers in virtual wallets for use online and in brick-and-mortar settings.
The Treasury confirmed to PoliticsHome a number of roundtable discussions with academics, organisations and businesses about a CBDC had begun this week.
Proponents of a UK CBDC believe it could promote stability in the UK economy. This is at a time when the way people use money has changed rapidly within a short time frame.
The letter sent to Downing Street raised 20 individual points over the possible implementation of a UK CBDC.
It claimed it was “unclear from the work so far” what advantage it could bring to the UK. This issue has previously been raised by Mervyn King, the former Governor of the Bank of England, who claimed 'Britcoin' was a “solution without a problem”.
Fysh called on the Government and Bank of England to make commitments to ensure a CBDC would make surveillance and censorship “impossible” by design. Earlier this year the Treasury and Bank of England insisted it would not pursue "government or central bank-initiated programmable functions”.
The letter also claimed there was “no need to spend many years and a great deal of money” on how a CBDC is issued and managed by a central authority. Blockchain technology, which is used by decentralised cryptocurrencies such as Bitcoin, makes it impossible for outsiders to see people’s transactions and access their bank balance. Unlike a typical database, it records transactions as blocks on a virtual register.
Fysh said he believed a CBDC could give the public the opportunity to have access to finance at zero per cent rates. This is compared to taking out loans with retail banks, on which consumers have to pay high levels of interest.
The Conservative MP or Yeovil added that he believed the public would only trust a CBDC if it was designed robustly, rather than trusting on the basis it was supplied and managed by a central authority. “The best thing any UK central bank digital currency and related thinking could do would be to lead in that direction by example,” Fysh added.
Andrew Griffith, Economic Secretary to the Treasury, said while the Government was considering whether to implement a CBDC, “any proposal” will guarantee the same privacy rights as card payments and bank accounts.
“We are taking a thoughtful approach to the very real policy issues here. We’ve already kicked off one of the largest ever consultation together with the Bank of England and earlier this week held the first of a number of roundtables with a wide range of organisations including academics, civil society organisations and small businesses," he said.
“The Government has committed to introducing primary legislation before launching a digital pound. We would never seek to replace cash – indeed we have just this summer protected access to cash in law, meaning that the vast majority of people even in rural areas will have to travel no further than three miles to withdraw money.”
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