Citing that the ‘concept seems to present a lot of risk for very little reward’, a House of Lords report has dismissed the idea of forming a central bank digital currency (CBDC) in the UK.
The recent government report outlined that in the event of economic turbulence, a CBDC could have a significant impact on banks in the region, specifically given the volatility of digital currency.
Lord Forsyth of Drumlean, Chair of the House of Lords Economic Affairs Committee, commented on the decision: “The introduction of a UK central bank digital currency would have far-reaching consequences for households, businesses, and the monetary system. We found the potential benefits of a digital pound, as set out by the Bank of England, to be overstated or achievable through less risky alternatives.
“We took evidence from a variety of witnesses and none of them were able to give us a compelling reason for why the UK needed a central bank digital currency. The concept seems to present a lot of risk for very little reward. We concluded that the idea was a solution in search of a problem.”
The decision comes despite the UK government’s elevated focus on digital currency and utilising it in a way that can bolster the economy, as its value has grown over the pandemic, with consumership and finances becoming increasingly digital.
That being said, recent prices of digital currencies underline the volatility of the market, exasperating the notion that their integration into the mainstream economy could hinder stability.
Mexico was recently the latest country to layout plans for the introduction of a CBDC, following in the footsteps of El Salvador – with both countries citing financial inclusion as a key reason for the embracing of a CBDC.
In making the move, the Mexican government took to Twitter to announce the country’s ambitions to bring in a digital peso, as it looks to embrace a new digital age.