E-book could undermine financial stability and erode privacy, warn UK lawmakers

LONDON (January 13): E-book used by consumers could undermine financial stability, increase cost of credit and erode privacy, though version intended for wholesale use in the financial sector requires further evaluation British lawmakers said on Thursday.

The UK central bank and the Department of Finance said in November they would hold a consultation this year on whether to move forward on a central bank digital currency (CBDC) to be introduced after 2025 at the earliest. .

Central banks around the world have stepped up work on CBDCs to prevent the private sector from dominating digital payments as the use of cash declines. The prospect of widely used cryptocurrencies issued by Big Tech has also galvanized these efforts.

But an e-book used by households and businesses for daily payments could allow people to transfer money from commercial bank accounts to digital wallets, according to a report from a House of Lords committee, the upper house. unelected from Parliament.

This could trigger financial instability in times of economic crisis and increase borrowing costs as a key source of finance for lenders dries up, he said.

A digital book could also harm privacy, the report adds, by allowing the central bank to monitor spending.

“We were really concerned about a number of risks posed by the introduction of a CBDC,” Economic Affairs Committee chairman Michael Forsyth told Reuters.

Many benefits for consumers could be “achieved through alternative means with less risk,” Forsyth said, stressing that regulation is a better tool to stave off the threat of crypto issued by big tech companies.

However, a wholesale CBDC used to transfer large sums could make securities trading and settlement more efficient, according to the report. The UK central bank and the Department of Finance are expected to consult on their advantages over expanding the existing settlement system, he said.

The UK parliament should have the final say on any decision to launch an e-book, according to the report, calling on lawmakers to vote on its governance as well.

A CBDC would “have far-reaching consequences for households, businesses and the monetary system,” Forsyth said. “It has to be approved by parliament.”

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