As the world evolves towards digital solutions, one can’t help but ponder why the United Kingdom hesitates with its own Central Bank Digital Currency (CBDC), the digital pound or as some have termed, the Britcoin. The Bank of England and Her Majesty’s Treasury sought public opinion on this proposition and were met with an unexpected public backlash due to privacy concerns and potential ramifications for cash.
The data derived from the public indicates fears surrounding surveillance and the destabilising effects of a digital pound on the U.K’s financial system. In a crisis, the digital pound could allow depositors to rapidly withdraw funds from commercial banks, which could spur bank runs. This backlash is a part of wider criticism of CBDCs in the crypto sector, considered by many to be a clumsy governmental attempt to curtail private money such as decentralised cryptocurrencies.
Conversely, some argue that state-issued digital currencies could foster financial inclusion. They add that it is a stretch to claim the government’s sole motivation for these digital currencies is to exterminate cryptocurrencies. Yet, the privacy and stability concerns raised in the U.K consultation can’t be disregarded. It remains uncertain if these apprehensions considerably jeopardise the role of CBDCs in advanced Western economies.
Supporters of digital currencies argue that in an increasingly digital society, the U.K needs to evolve in pace with the innovation in the payment sector. Worries around privacy in commercial transactions with a digital pound are not unfounded, but privacy can also be maintained to a significant extent with the right design and regulations. Critics warn of the risk of ‘deposit flight’ from commercial banks in times of crises now that financial transacting primarily occurs online.
Financial inclusion, a critical argument for CBDCs, may be beneficial in emerging markets. However, does this carry weight in the U.K? With an economy where most adults have a bank account, it seems unlikely that a digital pound would significantly boost financial inclusion in the country.
Several crypto enthusiasts view CBDCs as a route to suppress private money including decentralised cryptocurrencies like BTC. That said, CBDCs could potentially legitimise the broader concept of digital currencies, which could indirectly benefit cryptocurrencies.
To sum up, while the arguments for and against the digital pound continue, the UK’s full-scale launch seems likely to be years away. Bearing in mind the foreseen challenges, it’s crucial to weigh the benefits against the potential drawbacks carefully before making a decision that’s not only economical but social.
Source: Cointelegraph
