In response to the Treasury Committee’s report on the potential introduction of a retail central bank digital currency (CBDC) or ‘digital pound,’ the UK government has agreed to embed privacy protections in the forthcoming digital pound legislation.
The Bank of England and HM Treasury are exploring the need for a digital pound, which would be a digital form of cash issued directly by the Bank of England and would not replace cash. How people pay for things is changing, and digital payments are becoming more common.
The UK government has assessed the potential necessity for a digital pound in light of evolving trends and the rise of new monetary forms that could jeopardize the country’s financial stability. The determination to develop a digital pound is anticipated in 2025–2026, with ongoing concerns about the privacy and security of transactions.
In response, the Treasury Committee had earlier advised against rushing the implementation, underscoring the importance of addressing data privacy concerns before advancing with a retail digital pound.
Specifically, the Committee recommended that the legislation restrict the use of digital pound data by the government and Bank of England to purposes permitted for law enforcement.
MPs called for more transparency in reporting the cost of the digital pound project. The Bank of England agreed to consider presenting these costs separately in its annual report, while the government’s response included addressing criteria for the digital pound launch and interest possibilities.
The Committee stressed financial stability risks and the need for financial inclusion, especially ensuring continued cash access. Harriett Baldwin MP, Chair of the Treasury Committee, highlighted the importance of privacy protection, expressing satisfaction that the government acknowledged and is committed to addressing privacy concerns in the proposed legislation.
Central bank digital currencies (CBDCs) have garnered global attention, with more than half of the world’s central banks exploring or developing digital currencies.
As of 2023, over 60 central banks are in the process of researching and/or developing CBDCs, with some having already launched pilot programs and releases. The motivations for issuing CBDCs vary between countries, and the design and policy approaches also differ.
