Rishi Sunak first proposed a central bank digital currency when he was chancellor. Photo: Frank Augstein/PA
Rishi Sunak's ambition to turn the UK into a digital currency hub has been hit hard by public backlash over plans to introduce a virtual alternative to cash called “Britcoin”.
Threadneedle Street has been hit over 50,000 responses to a joint consultation with the Treasury on introducing a central bank digital currency by the end of the decade.
The project, which was launched in 2021 by then-Chancellor Mr. Sunak as part of efforts to digitize the economy, sparked widespread public concern about privacy, as well as anger over the possible implications for cash.
Advocacy groups civil liberties organizations such as Big Brother Watch have urged the public to write to the Bank stating their privacy concerns, though industry response has also been mixed.
Banking lobbyists are sounding the alarm over plans to allow the British to hold large sums of digital pounds , which the Bank recognizes increases the risk of faster withdrawals of bank accounts, as it will be easier for customers to move their money elsewhere.
Andrew Bailey and Jeremy Hunt backed the project, while the governor and chancellor of the bank suggested that a digital currency would likely be needed by the end of the decade, when the use of cash decreases.
1304 Money is no longer the main thing
The prime minister, who had declared his intention to turn the UK into a global center for crypto-asset technology, was forced earlier this year to abandon plans to issue a non-fungible token (NFT) for sale through the Royal Mint in less than 12 months. after the project was first announced.
UK Finance, which represents more than 300 financial services companies across the country, warned in a statement that Britcoin “could raise concerns about privacy and government interference” if it is widely distributed. , including the payment of wages.
He described the Bank's initial cap of £10,000 to £20,000 as excessive, adding that the proposed figures “would bring significantly more risks to financial stability than benefits”, especially in times of crisis.
While digital currencies could pose a threat to traditional sources of funding for large lenders, UK Finance argues that the £3,000 to £5,000 floor better reflects consumer spending habits, highlighting that in 2021 the average person spent just £89 £1,053 a month in cash and £1,053 on debit cards.
A lower limit will comfortably cover average monthly expenses and mitigate financial stability risks, UK Finance said.
However, others believe that the digital pound should be as flexible and user-friendly as cash. The Payment Services Regulator (PSR), which oversees all major systems in the UK, including those used for payroll, checks, Mastercard and Visa, said Britcoin should act as an asset of last resort, allowing people to quickly transfer money to digital. pounds in the event of a financial crisis.
1304 Share of cash transactions
Lord Bridges, chairman of the House of Lords Economic Affairs Committee, said that while the Bank and Treasury were “absolutely right” to look into the implications of the introduction of the digital pound, risks such as threats to financial stability, privacy and hacking should all be properly looked into. .
He also asked how much the project would cost the taxpayer, regardless of whether any digital currency was introduced.
The Bank's latest annual report shows that millions of pounds have already been spent on researching the economic benefits of CBDC, although this was mainly funded by withholding interest paid on commercial bank money deposited with the Bank.
Privacy concerns were widespread. raised in the responses, with any digital pound unlikely to provide complete anonymity to its user to prevent fraud and crime.
UK Finance also questioned whether the public would be satisfied with the Bank's assurance that it would not know the identity of the users, even if it controls the total amount of currency in circulation.
This is “key to overcoming doubts and concerns in civil society about the ability to centrally oversee the digital infrastructure of the pound sterling,” the lobby group said.
The bank entered the second phase of the design process for Britcoin before officials will decide whether to continue using the currency by the middle of this decade.
Mr Hunt said in May that any launch of a digital pound must be approved by parliament. Mr Hunt also insisted that “cash is not going anywhere” and last week the government passed a law protecting its use as long as there is demand for physical notes.
Central Digital Currencies banks (CBDC) also drew the ire of a former bank manager. Lord King called them a “no-problem solution” that has “risks but no clear benefits”. He cautioned against creating something that the public doesn't want just because it has a “sexy digital currency name”.
A bank spokesman said he was considering responses and would respond in due course.
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