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Why does the Bank of England need a central bank digital currency?
That’s the question posed by two Lords in England in a comment piece published in The Telegraph last week.
Lord George Bridges and Lord Michael Forsyth of Drumlean warned against introducing a CBDC “by stealth.”
The lords expressed their concern that the BOE is exploring technologies for implementing a digital pound “while Parliament has been dozing and mute.”
Both Bridges and Forsyth expressed a few areas of concern, including privacy and criminal activity.
“A CBDC could not be used anonymously without creating a haven for criminal activity. So payments data on who is using digital pounds would be needed. Who holds that, and who has access to it, opens up a can of worms, creating concerns that a digital pound could be used for state surveillance, dragging the Bank into issues that could undermine its independence,” the lords wrote.
Instead of allowing the BOE to maintain full control of the CBDC project, the lords are pushing for legislation that would guarantee that a “Britcoin could not be introduced without primary legislation and proper parliamentary scrutiny.”
The BOE’s testing and interest in CBDCs is not new, however. The bank started publicly exploring a possible CBDC last year, publishing a paper on the topic back in February. As well as looking into what’s needed to build and launch a CBDC, the BOE gave a very rough possible timetable for decision-making.
“The work […] will reduce the lead time to launch should the decision at the end of this stage be to implement the digital pound in the UK, which could then be introduced in the second half of the decade,” the BOE’s Jon Cunliffe said at the time.
In April, the BOE wrapped its distributed ledger technology project, dubbed Project Meridian. The project had demonstrated “how to orchestrate synchronized settlement in central bank money using housing transactions.”
Earlier this month, the BOE also penned a paper on CBDC implementation alongside the Federal Reserve and five other international financial institutions.
“Some of the members of this group are approaching a point where they may decide on whether or not to move to the next stage of their CBDC work,” the paper said. “This may include deeper investment in design decisions relating to technology, end user preferences and business models, while leaving open the decision on whether to issue CBDC.”
But England isn’t the only country facing scrutiny for its work, the US is also engaged in conversations about CBDC implementation — how it would work, what’s needed and why some legislators believe it could be a bad thing.
Florida has already enacted an anti-CBDC law, signed by Governor Ron DeSantis, which will take effect on July 1.
On Capitol Hill, lawmakers have also introduced a bill this month — the Digital Dollar Pilot Prevention Act — to prevent a CBDC.
“CBDCs would threaten the liberties of law-abiding Americans and are being used by authoritarian countries right now to crack down on dissent,” Rep. Alex Mooney, R-W.V., who introduced the bill, said in a statement Thursday.