Only Parliament can decide on state -supported digital currencies, say colleagues

The British Parliament and not the Bank of England have to decide on the introduction of a state -supported digital currency, because the step would have "far -reaching consequences", warned an influential committee of the House of Lord on Thursday.

In a report by the House of Lord's Economic Committee, many of the potential advantages of a digital currency issued by the central bank were dismissed and said that the proposal had potentially serious effects, including data protection issues. It described the concept as "a solution in search of a problem".

The BoE, which last year set up a joint task force with the Ministry of Finance, to evaluate the costs and benefits of its own digital currency, is one of more than 90 central banks worldwide that examine the concept.

The idea is to create the equivalent of a digital banknote with which people can buy goods and receive payments that are directly connected to the central bank. It would compete with commercial banks that make it possible for people to make digital payments on credit and debit card transactions and other electronic payment methods such as PayPal.

The Boe said that a digital central bank currency could improve the efficiency of transactions and reduce costs.

But the report of the committee, which the former Boe-Gouvenur Mervyn King also belongs to, found only a few compelling reasons for such a currency. "We have not yet heard convincing arguments why Great Britain needs retail" [Central Bank Digital Currency]. "

It warned that every state digital currency - in particular one that included private accounts at the Boe - have "far -reaching consequences for households, companies and the currency system for the coming decades and can recover considerable risks depending on the design".

The report said that such a currency could be used by the state to spy on people's output behavior and to calculate people to keep money, although Andrew Bailey, governor of the Boe, had told the committee that this was not the purpose.

"The application of monetary policy should not be a motivation for the introduction of a digital central bank currency," the report says.

There was potential effects on national security and referred to the susceptibility to interventions by enemy powers and the stability of the rest of the financial system.

For all of these reasons, the report states that every step of the state to reflect other digital currencies must require the consent of both chambers of parliament on primary legislation.

"We were really worried and frankly I was a little disappointed with the statements of the Ministry of Finance on this topic about the role of Parliament in the introduction of a [Central Bank Digital Currency]," said Lord Michael Forsyth, the conservative peer and chairman of the committee, the Ft.

"When the finance minister testified, he did not really dispute our concerns that this could be something that only invented by the Ministry of Finance and the Bank of England and as in the [Boe]’ s Vogtei, "he added.

Central bankers regularly said that the introduction of their own digital currencies would ward off the threats from privately financed currencies introduced by companies such as Meta, formerly Facebook. The report states that the officials had failed to explain which threat they represented.

The Boe refused to comment on the report.