No ‘convincing case’ for UK retail CBDC, say legislators

There is currently no “convincing case” for the Bank of England to issue a retail central bank digital currency (CBDC), a report by a parliamentary committee concludes.

The House of Lords Economic Affairs Committee – which includes former BoE governor Mervyn King – described retail CBDC as a “solution in search of a problem”.

The report argues that while retail CBDC “may provide some advantages”, it could also “present significant challenges for financial stability and the protection of privacy”.

In the report, the committee considers several of the arguments for a CBDC and says none seem to be sufficient justification to move ahead with issuance at present. The risk of private money creation usurping central banks could be addressed through regulation, the report says. Cash remains widely used and it is not clear the properties of CBDCs would make them an adequate substitute, it adds.

Furthermore, a CBDC could not be completely anonymous due to the need to address money laundering risks, the report notes, which could raise concerns over privacy.

However, the report adds that consumer preferences, technological developments and the actions of other countries “may enhance the case for a UK CBDC in the future”.