Select committee: Economic Affairs Committee

Recommendation 7

3rd Report - Central bank digital currencies: a solution in search of a problem? Published 13 Jan 2022 Paragraph 66

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)

We heard that some central banks are concerned that big tech companies will combine crypto asset technology and their vast network of users to launch a digital currency capable of rapid adoption by large numbers of people. While we agree this is a risk, the introduction of a CBDC may not be a necessary or complete response. Private entities of a size that can compete with the existing payments systems can and should be regulated. The Joint Taskforce should set out answers to the following questions: What is the precise threat to the monetary system which is posed by privately issued stablecoins and other crypto assets? What could a CBDC do to offset that threat? What is the role for regulation? We welcome the work of governments and financial watchdogs in recent months to start identifying ways to regulate issuers of crypto assets.

From: Economic Affairs Committee, 3rd Report - Central bank digital currencies: a solution in search of a problem?, paragraph 66, 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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