British MPs have raised concerns after the Treasury and the Bank of England announced plans for a consultation to launch a state-backed digital pound this decade.
CBDC
A CBDC is different from a cryptocurrency. The new form of digital money would be issued by the Bank of England, though there is public concern over the risk of state surveillance and control.“At this stage, we judge it likely that the digital pound will be needed in the future. It is too early to decide whether to introduce the digital pound, but we are convinced preparatory work is justified,” the Bank of England and HM Treasury wrote.
They added that the digital pound would be a new form of sterling, similar to a digital banknote, issued by the Bank of England. They claimed that if introduced, it “would exist alongside, and be easily exchangeable with, cash and bank deposits” and would be used by households and businesses for “their everyday payments needs.”
“The digital pound would maintain public access to retail central bank money and, as our lifestyles and the economy become ever more digital, it would also promote innovation, choice, and efficiency in domestic payments,” they added.
Banknotes Used Less Frequently
Making a statement in Parliament, Andrew Griffith, Economic Secretary to the Treasury, said the consultation paper “aims to open a national conversation about the future of money in the UK,” adding that “Cash will remain important, but banknotes issued by the Bank of England are being used less frequently by households and business.“We’re determined that the UK should remain at the forefront of innovation in money, payments, and financial services, this is part of the Government’s vision for a technologically advanced, sustainable, and open financial services sector.”
He stressed that a digital pound would be a “digital counterpart to familiar, trusted banknotes and coins and subject to rigorous standards of privacy and data protection.”
Conservative MP Danny Kruger asked, “should be possible for the authorities to observe the transactions of any citizen if they have cause to do so?”
“Can he tell us whether money that is used through this new digital mechanism will require cash to be withdrawn from circulation in exact proportion?” he added.
“Because if not, then he has proposed to print new money. But if the cash will be withdrawn, in proportion as the digital pound is issued, then we are talking about the end of cash, aren’t we, because progressively the digital coin will replace the use of cash?” said Kruger.
The Treasury minister said people would not be able to have a bank account directly with the Bank of England.
“I do want to reassure him on cash: this will, by design, not replace cash. It will from a monetary policy perspective, although that’s something, as with all of these questions, that members may respond to it during the consultation, but it is envisaged from a monetary policy perspective that this certainly does not increase money supply, “ said Griffith.
‘Make Government Bigger and Bigger’
Last year, commentator and investor Simon Dixon, who runs the global online investment platform Bank To The Future, told The Epoch Times that CBDCs were “a radically different way of creating money.”“When a central bank creates a digital currency, it doesn’t have to be backed by a loan so it is a radically different way of creating money, essentially you are just creating the money, it doesn’t have to be lent into existence,” he said.
A CBDC could also theoretically mean automating tax collection at the point of transaction, which then would be tied to a passport which could stop people from traveling if this is in dispute.
“The reason why people are scared about this is that by allowing the government to create money, history has shown that they will use that power in order to enforce agendas to make government bigger and bigger.”
Dixon added that the counterforce is private cryptocurrencies such as Bitcoin or Ethereum. “That allows the market to compete,” he said.
