Concerns about personal data use are also addressed in the paper, which suggests that laws establishing a digital pound should severely limit the amount of data used by the government or the Bank of England.
Lawmakers in Britain are calling for caution in introducing a retail digital pound, stressing the need to weigh the benefits of technological advancement against any risks.
There has to be thorough deliberation before moving forward with the potential introduction of a retail digital pound, as members of the Treasury Select Committee have voiced their reservations.
Although the committee recognizes the innovative advantages, they have requested that the Bank of England (BoE) and Treasury carefully evaluate the need for this change, including all costs and risks.
In the meantime, the committee’s study advises placing lower initial restrictions on the value of retail digital pounds to lessen the danger of possible bank runs during moments of market turbulence.
This precautionary move attempts to deter significant transfers of savings into digital wallets, which might increase the risk of bank failures and hike borrowing rates.
Concerns about personal data use are also addressed in the paper, which suggests that laws establishing a digital pound should severely limit the amount of data used by the government or the Bank of England.
In order to prevent the digitalization of money from leading to unnecessary monitoring, the committee stresses the need to safeguard user privacy.
The research suggests that the government and the Bank of England should be explicitly limited in their ability to use data gathered via the digital pound for reasons other than those currently approved for law enforcement in the event that legislation is passed to introduce a digital pound.
Before contemplating the launch of a retail digital pound, committee head Harriett Baldwin emphasized the need for strong proof.
She stressed that there had to be concrete evidence that doing so would be good for the UK economy without adding unnecessary danger or uncontrollable expense.
According to Baldwin, these considerations should be carefully considered before deciding whether to include them in the financial system.
Wallets