Bank Of England Faces CBDC Battle Following 50,000 Consultation Responses

July 5, 2023
Back
The Bank of England is facing widespread opposition to its plans to study and potentially launch a UK central bank digital currency (CBDC), after receiving more than 50,000 responses to its "digital pound" consultation.

The Bank of England (BoE) is facing widespread opposition to its plans to study and potentially launch a UK central bank digital currency (CBDC), after receiving more than 50,000 responses to its "digital pound" consultation.

In February, the BoE and HM Treasury opened a joint consultation on the potential case for a UK CBDC, also known as the digital pound.

The BoE pitched the digital pound as a “new form of digital money" for use by households and businesses for their everyday payments needs.

In the consultation, the BoE said the digital pound would “sit alongside'' cash rather than replace it, and said that no “programmable” features would be applied to the digital pound without users’ consent.

However, during the five months that the consultation was open to the public — having closed on June 30 — the BoE’s assurances appear to have failed to assuage these concerns.

VIXIO understands that more than 50,000 consultation responses were received by the BoE, submitted via a mixture of direct email responses and the BoE’s online questionnaire.

This makes the joint consultation on the digital pound one of the highest-engagement government consultations on record.

Other government consultations that generated more responses include: the revocation of COVID-19 vaccination requirements for NHS and social care workers (90,000 responses); Heathrow Airport's Runway 3 expansion (70,000 responses); and public sector data sharing for digital ID (60,000 responses).

Susannah Copson, legal and policy officer at Big Brother Watch, told VIXIO that the 50,000 responses demonstrate the public's "overwhelming strength of feeling" against the government's plans.

"Plans for a British CBDC present a range of threats to privacy, financial freedom and equality in the UK," she said. "It's vital that the government listen to the public's concerns and shelve these proposals."

Social media campaigns bear fruit

Speaking to VIXIO, a spokesperson at the BoE said the central bank will provide a full breakdown and summary of responses when it publishes its own consultation response in “due course”.

However, from watching the consultation being talked about on social media, it is clear that many of the public responses came from two sources: Big Brother Watch and Together Declaration.

Both campaign groups are focused on privacy, surveillance and civil liberties issues, and both published template responses for their followers to send to the BoE via email.

Followers were instructed to use the templates to structure their responses, but to add their own personal concerns and observations.

“The Government has not demonstrated why we need a Central Bank Digital Currency in the UK,” Big Brother Watch wrote in its template.

“I do not understand why the Government is pursuing the introduction of a CBDC and do not think the case has been made to justify its creation.

“These plans would fundamentally change British society and come with a number of risks, yet it is unclear for what purpose the Government is pursuing this policy and unclear whether it would be of real benefit to the public.”

Similarly, Together Declaration wrote that the digital pound is an “undemocratic ‘solution in search of a problem’ with no clear benefit to the public”.

Mervyn King, former BoE governor, has also characterised the digital pound as a “solution without a problem”, as has the House of Lords Economic Affairs Committee in a report published last year.

Regulatory response

Responses to the digital pound consultation from regulators were marked mainly by their neutrality, with regulators neither taking a position for or against at this stage.

Speaking to VIXIO, a spokesperson for the Payment Systems Regulator (PSR) said the agency supports the BoE’s exploration of CBDC, and wants to ensure that users’ interests are represented during the process.

“As the regulator for payment systems in the UK, we want to promote effective competition and innovation, and ensure that payment systems are operated and developed in a way that considers and supports the interests of all the businesses and consumers that use them,” said the PSR.

A key concern for the PSR is protection from fraud when making and receiving payments — an area where the agency believes that a well-designed CBDC may offer comparative advantages.

Similarly, UK Finance said its members can envisage a future where “digital pounds are available to those who want them”, but insisted that a UK CBDC must “sit alongside” commercial bank money.

“Overall, members are supportive of work to explore and investigate the opportunities for digital money in the UK,” it said.

“However, a question remains on how a digital pound is linked to and instrumental to the objectives the BoE is trying to advance.

“More thought on how those objectives could be met, including with the use of other tools and solutions provided by the private sector, is warranted.”

At the same time, UK Finance said it is “imperative” for the BoE to conduct a proper cost-benefit analysis of launching a digital pound, which includes not only the infrastructure build and maintenance but also “potential negative externalities” and “unintended effects”.

“We believe that the BoE and HMT will need to put forward a complete and detailed impact assessment of their own,” said UK Finance.

“A CBDC affects the whole payment ecosystem and there are not yet enough empirical studies to understand the impacts in their totality.”

Our premium content is available to users of our services.

To view articles, please Log-in to your account, or sign up today for full access:

Opt in to hear about webinars, events, industry and product news

To find out more about Vixio, contact us today
No items found.
No items found.