Select committee: Economic Affairs Committee

Recommendation 1

3rd Report - Central bank digital currencies: a solution in search of a problem? Published 13 Jan 2022 Paragraph 15

Economic Affairs Committee Central Bank Digital Currencies All items in this report Report on parliament.uk ↗ Inquiry on parliament.uk ↗

Recommendation (the committee's words)

Digitalisation is transforming payments systems and governments must consider what responses are necessary. Any UK central bank digital currency would have far-reaching consequences for households, businesses and the monetary system for decades to come. Parliamentary scrutiny should be an essential part of assessing the case for a CBDC and if the Government decides to proceed, Parliament should have the opportunity to vote on any final decision, along with the governance arrangements for any such system, during the passage of primary legislation. The Government should set out the costs of introducing and operating any design that is proposed.

From: Economic Affairs Committee, 3rd Report - Central bank digital currencies: a solution in search of a problem?, paragraph 15, 13 January 2022

Government response

Government response to Central bank digital currencies: a solution in search of a problem? (1 February 2022)

The government responded to the whole report on 18 March 2022 (deadline 13 March 2022).

Summary written by Accountability Index from the government's response. It is not the government's own words.

The government says "No decision has been taken" on issuing a UK CBDC, and that exploratory work will continue, informed by a consultation in 2022.

HM Treasury and the Bank of England "will publish a consultation in 2022" setting out their assessment of the case for a UK CBDC, including the merits of further work on an operational and technology model.
The government "agrees" that CBDCs pose a broad range of opportunities and risks requiring careful evaluation, and expects to "fully engage Parliament", including through any possible legislation.
On cash, the government says a CBDC would exist alongside cash rather than replacing it, and states it "is committed to legislating to protect access to cash".
The government "agrees" that any CBDC would need to be adaptable and able to be updated rapidly in response to technological change and emerging security threats.

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Bank of England response to Central bank digital currencies: a solution in search of a problem? (16 March 2022)

Published 18 March 2022.

Summary written by Accountability Index from the government's response. It is not the government's own words.

The Bank says no decision has been made on whether to introduce a CBDC, and that it is in a "research and exploration" phase, with many of the Committee's issues to be addressed in a 2022 Consultation Paper.

The Bank and HM Treasury will publish a Consultation Paper in 2022 assessing the case for a UK CBDC, and the Bank says it will address the need for in-depth articulation of the 'use case' in that paper.
On monetary policy, the Bank says it does not "consider expanding the monetary policy toolkit to be a motivation for the introduction of a CBDC", noting the opportunities are "largely conceptual" and face practical constraints.
On the 20% deposit scenario, the Bank notes its 2021 modelling was "an illustrative scenario rather than a forecast", and says it will cover bank disintermediation in the Consultation Paper.
On wholesale CBDC, the Bank points to its existing RTGS service, which it is due to move to a new platform in 2024, and says it will issue a public consultation in spring 2022 on further RTGS enhancements beyond 2024.

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