Any potential future release of the UK’s own crypto currency, or Britcoin, “would have far-reaching consequences for households, businesses and the monetary system,” according to House of Lords members.
The Lords Economic Affairs Committee believes the idea of introducing a central banking digital currency (CBDC) would pose a "significant risk" to banks, with the Bank of England among 90 central banks worldwide reportedly exploring avenues to introduce its own digital currency.
The Committee reached its decisions after hearing the testimonies of Bank of England's Governor, Andrew Bailey, his deputy Sir John Cunliffe, economic secretary to the Treasury, John Glen and senior Treasury official Charles Roxburgh.
Although those testimonies were not convincing enough to make a case for a CBDC, The Bank of England was encouraged to explore the idea further for any potential benefits.
Laith Khalaf, head of investment analysis at AJ Bell echoed some of these concerns put forward by the committee.
“It’s true that a digital pound could cause widespread disruption in the banking sector if it is introduced, as well as increasing the chance of a run-on commercial banks in times of financial stress.”
He also points out how widespread acceptance of Britcoin could severely change the way banks operate today, with a move away from free banking services, as well higher interest rates passed on to borrowers.
Khalaf adds that benefits include, “facilitating cross border payments, without the eye-watering fees often levied by high street banks,” create opportunities for fintech firms to build supporting infrastructure systems and “offer an alternative to card payments for online retailers,” among other potential upsides.