The Bank of England (BOE) recently shared that the majority of the 50,000 feedback received during the public consultation on the digital pound were centered around two main concerns: privacy and fiat scarcity. In his speech titled “Money and payments: a ‘black ships’ moment?”, Jon Cunliffe, the bank’s Deputy Governor, discussed various aspects related to central banks’ roles in cross-border payments, stablecoin regulations, and Central Bank Digital Currencies (CBDC).
Addressing Privacy Issues
During the public consultation held from February to June, it was important for the bank to understand the hopes and fears of users before making any formal decisions regarding the digital pound. Cunliffe assured the public that a digital pound would not compromise privacy. He emphasized that the consultation paper had already tackled privacy concerns by ensuring that neither the central bank nor the government would have access to users’ data. Instead, private firms would handle user data, similar to the commercial banking system, offering an additional layer of privacy.
The use of private firms to handle the development of the CBDC, rather than relying solely on government officials, is part of the proposed model. This approach is expected to foster stakeholder participation and decentralize the decision-making process.
Addressing Fiat Scarcity Concerns
Cunliffe also acknowledged concerns around the availability of fiat currency. He stated that the Government has already passed legislation ensuring the continued availability of fiat currency as long as there is a demand. The Bank of England will play its role in providing and facilitating access to cash.
Furthermore, the bank is actively researching programmability and engaging with stakeholders to determine and address potential financial instability factors associated with the implementation of the digital pound. This early stage of development allows for careful consideration and mitigation of risks to ensure the stability of the digital currency.
It is worth mentioning that the introduction of a digital pound has posed competition to private cryptocurrencies, particularly stablecoins. However, critics of CBDCs have rejected this move. Cunliffe recognized the rising popularity of stablecoins and acknowledged the need for global regulations to safeguard investors. He also stressed the importance of cross-border payments for global trade.
“The Bank expects very soon to issue a Discussion Paper setting out its proposed regulatory regime for systemic retail payment systems using stablecoins. I am not able to set out the proposed regime in detail today,” added Cunliffe.
Privacy Concerns Beyond the UK
The issue of privacy concerns extends beyond the UK, as seen in other countries exploring digital currencies. European Union privacy agencies, the European Data Protection Board, and the European Data Protection Supervisor recently released a joint statement on the Digital Euro draft. They highlighted that certain provisions in the proposed legislation would grant authorities access to a wide range of user data.
In the United States, there are also critics of CBDCs who argue that it is an attempt by authorities to surveil and control citizens. Florida Governor Ron DeSantis, for example, has taken a strong stance against cryptocurrencies and banned CBDCs in his state.
