House of Lords inquiry into central bank digital currencies

UK parliament's upper chamber has asked the public to send in written submissions

The Houses of Parliament in the UK                                 
The House of Lords has launched an inquiry into CBDCs. Photo:Shutterstock
                                

The UK parliament's House of Lord’s Economic Affairs Committee has launched an inquiry into central bank digital currencies (CBDCs).

As part of the inquiry, it has asked the public to send in any written submissions regarding CBDCs by 15 October.

The inquiry comes as HM Treasury and the Bank of England (BoE) are exploring the concept of a CBDC. The committee will take evidence on the main issues that HM Treasury and the BoE face as they continue their work.

It will also investigate how a CBDC may affect the role of the BoE, monetary policy and the financial sector.   

The questions asked

The committee is seeking answers to the questions such as “What are the main issues driving central banks to explore CBDCs?” and “What are the main benefits and risks of a CBDC?”.

It has also asked how the Bank of England and HM Treasury plan to address concerns over privacy and the traceability of payments when exploring CBDC design.

Another consideration is how a CBDC may affect the UK’s standing on the international stage, whether through economic foreign policies or geopolitical influence, and if there are implications for the effectiveness of economic sanctions.

Almost two-thirds of people would use a CBDC

Nearly two-thirds of European, Asian and US adults said they would be likely to use a CBDC.

Research from European deep-tech company Guardtime in July found that 64% of people are likely to use a CBDC and 33% said they would be very likely to use one.

Only a tenth (10%) said they would never use a CBDC, but 33% said they would even be willing to convert their savings into CBDC within a month of a successful launch.

Roughly a quarter (26%) would do the same but within six months, while only 11% said they would never convert savings into a CBDC.

30% happy for salary to be paid in CBDC

Just under a third (30%) would happily have their salary paid in a CBDC within a month and 27% after one to six months. However, roughly one in 10 people would never want their pay in a CBDC.

Further research from the Bank of International Settlements shows that 86% of central banks are actively looking into a CBDC.

Another 60% are experimenting with the technology and 14% deploying pilot projects.

Guardtime believes the Covid-19 pandemic has accelerated the digitalisation of all aspects of society and that the first major CBDC could be launched within three years.

'Cryptocurrencies have generated excitement and concern'

Lord Forsyth of Drumlean, chair of the committee, said: “New cryptocurrencies have generated a great deal of excitement, and concern, across the globe. The government and Bank of England must carefully consider the implications of creating a new, state-backed, form of digital cash.

“To inform our work we want to hear from as broad a range of people as possible. If you have a view on any aspect of central bank digital currencies, look at our call for evidence and let us know what you think.”

Further reading: Fed’s Christopher Waller ‘highly sceptical’ of US CBDC

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