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UK’s House of Lords Launches Economic Affairs Committee to investigate the implications of a central bank digital currency

UK’s House of Lords Launches Economic Affairs Committee to investigate the implications of a central bank digital currency

The UK’s House of Lords has launched an Economic Affairs Committee to investigate the implications of a central bank digital currency (CBDC) in the UK. The committee has opened the inquiry up to anyone who may be interested in contributing their views on CBDCs.

With the Bank of England and HMRC Treasury looking into a CBDC, the House of Lords’ Economic Affairs Committee has launched their inquiry to complement the exploration of a central bank digital currency. 

In April of 2021 the Bank of England listed details for several job positions relating to the development of CBDCs, indicating that the bank was preparing to set up a department dedicated to the exploration of this digital currency. Similarly, the UK government announced the creation of a CBDC task force in collaboration with the Bank of England that would conduct exploratory work.

The latest insight from the House of Lords has revealed the multi-pronged approach that the UK is taking when it comes to exploring the area of CBDCs and its applicability in the UK.

Lord Forsyth of Drumlean, Chair of theEconomic Affairs Committee commented on the new inquiry:

“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,” 

He added:

“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,” 

Some of the issues the committee is looking to explore includes addressing concerns over privacy and traceability of payments when exploring CBDC design, as well as the effect a CBDC might have on competition and innovation in the payments and fintech sectors.

The Bank of England released its twice-yearly Financial Stability Report in July in which it addressed “highly speculative crypto assets” such as Bitcoin and how they are increasing in demand. It determined at the time they don’t pose enough of a threat that would require action from the bank for now. 

Given that the UK Government and the Bank Of England have confirmed the exploration of a CBDC, and are considering the implications of digital currency in the UK, we might expect an update on the UK’s official view on cryptocurrencies such as Bitcoin. Meanwhile, it will be telling to see the results of the public's contribution to the Economic Affairs Committee’s inquiry. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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