• MPs on the UK House of Commons Finance Committee have raised concerns about the government’s digital pound plans.
• In particular, it calls for the limit on the amount individuals can hold to be lower than planned and for the creation of an interest-bearing digital pound.
• Previous proposals from the UK and the European Union say central bank digital currencies (CBDCs) should not earn interest like cash.

British lawmakers are calling on the government to consider lowering the cap on potential holdings of the digital pound and to ensure its design does not prevent it from paying interest.

The UK and its 27-nation European Union neighbors said in their proposal that retail digital currencies should not be allowed to earn interest like bank deposits.

In a report published on December 2, MPs on the Treasury Committee of the House of Commons (House of Commons) raised concerns about the UK’s plans for a central bank digital currency (CBDC) announced in February. expressed. The government had said a digital pound was “likely to be needed” in the future.

Countries around the world are considering CBDCs as a way to improve payments and bring digital finance to central banks. While the US has yet to decide whether a digital dollar is worth the fuss, it is gaining attention in Europe, with the UK and European Union proposing plans to implement CBDCs for retail payments.

The EU’s plans to digitize the euro have sparked some backlash from EU lawmakers. British lawmakers appear to agree with an EU proposal to lower personal holding limits for the digital euro to prevent banks from losing customers, but they also want to prevent interest-earning on CBDCs, thereby making them similar to cash. It seems that he did not consent to handling it.

“We have asked the Bank of England and the Treasury to carry out further analysis of the monetary policy implications of interest payments on the digital pound and, in the meantime, to ensure that the design work does not impede the possibility of interest payments on the digital pound. “We recommend that this be done,” the British MPs said.

The UK Treasury’s Digital Pound Plan states that “like cash and many current accounts, the digital pound will not earn interest.” So while it’s useful for everyday payments, it’s not meant to be used for savings.

Lawmakers also called attention to the proposed holding limit of 10,000 to 20,000 pounds (approximately 1.85 million yen to 3.7 million yen, equivalent to 1 pound = 185 yen), saying, In order to reduce the risk of large-scale capital outflows, the EU’s European Central Bank has proposed an increase of 3,000 euros (approximately 480,000 yen, equivalent to 160 yen per euro). We proposed an equivalent lower limit.

The UK Treasury report echoed the skepticism of EU lawmakers, who said it was unclear whether the benefits of a digital pound would outweigh the potential risks, and said digital pound legislation would allow governments to “enforce law enforcement”. It warns that users should not be allowed to collect user data from payments beyond what is permitted by the law.

“However, we continue to undertake further consultation on the design of a digital pound so that the Bank of England and the Treasury can issue a digital pound if the benefits increase and the risks to privacy and financial stability are reduced. “I support the government and the Bank of England to provide detailed information as soon as possible on the criteria for making a final decision on the issuance of a digital pound.”

Pending a decision to issue a CBDC, MPs will also hold the government accountable for the costs of researching and designing a digital pound, and want the Bank of England and Treasury to keep track of these costs. There is.

“To ensure transparency of costs incurred, the Bank of England should report expenditure on the digital pound as a separate line in its annual report and accounts from 2024,” the report said.

The UK Treasury is due to close its consultation on the proposed model for a digital pound soon. After that, a decision will be made as to whether or not it will be published after an experiment and design stage.

｜Translation: CoinDesk JAPAN
｜Edited by: Toshihiko Inoue
｜Image: Shutterstock
｜Original text: UK Lawmakers Urge Lower Digital Pound Holding Limits