Bank of England digital currency raises risk of bank runs, MPs warn

Conservative MP Harriet Baldwin, there must be clear evidence that a retail digital pound will benefit the UK economy without increasing the risks. Photo: Eddie Mulholland

The committee's chair, Conservative MP Harriett Baldwin, said: «Before any decision is made to introduce a digital pound into our economy, it must be clearly demonstrated that a retail digital pound will benefit the UK economy without increasing risks and without leading to unmanageable costs.” financial system.»

MPs have called on the government to address concerns that organizations could misuse personal data gained from the digital pound, such as information about how people spend their money. Legislation should limit the ability of any future government to access this data, MPs said.

The government must also ensure that the move to a digital pound does not lead to greater financial exclusion by accelerating the decline of physical cash, the committee said. said.

Ms Baldwin said: “We must also be careful to ensure that any retail digital pound does not worsen financial exclusion for those who rely on physical money. The digitization of money cannot in any way leave these people behind.»

The committee also warned that the Bank's project work should not «distract the Bank of England from its core objectives of controlling inflation and maintaining financial stability.»< /p>

This follows a recent report from the House of Lords Economic Affairs Committee, which warned that the Bank of England's focus on achieving net zero targets is jeopardizing its ability to rein in inflation.

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A joint statement from HM Treasury and the Bank of England said: “We welcome the report of the Treasury Select Committee on CBDC; HM Treasury and the Bank of England will formally respond to this report in due course. We will also soon publish a response to our consultation paper, which will set out the next steps.

“We have always been clear that the digital pound will only be introduced alongside cash, and that protecting individual privacy is of paramount importance in any design.»