An update on a Central Bank Digital Currency for the UK

#together

The Bank of England has published an update on its progress in designing a Central Bank Digital Currency (CBDC). 

Many Together supporters responded to the consultation on a “digital pound” – a CBDC to be used by individuals and businesses – in February 2023.

In what was described as a “huge public backlash,” 50,000 respondents expressed concerns about the implications for financial privacy and whether we would lose control of our money. It was basically a “NO” from the public – after all, digital transactions already work quite nicely along cash payments and all the CBDC would add is an intermediary. Not just any intermediary: a CBDC would give the state a key role in transactions for the very first time in the UK.

But the government decided to go ahead with the design of the digital pound anyway, while saying that “no decision” had been made on whether to launch a CBDC. In its response to the consultation, it tried to allay public concerns while creating the conditions in which a CBDC could be launched:

We would like the general public to be aware of the digital pound and trust it to be available to them, reliable and secure, just like they are with cash … After completing the design phase over the next couple of years. the Bank and Government will assess the policy case for a digital pound and determine whether or not to proceed.”

So where are we now?

In the year since then, the Bank has been consulting with “specialist stakeholders” – the banks, fintechs and merchants who would use the digital currency. It’s been looking in detail at how the digital pound could work, in practice, the technology needed and at how it would be regulated, which is set out in the blueprint framework.

It’s also going to launch something called the “Digital Pound Lab”: “a simulated environment to … help assess the feasibility of developing a digital pound as a platform for innovation” which will carry out “hands-on experimentation”.

So far, so technical. But this matters because it shows that the government is continuing to invest time and resources into developing something the public don’t want: a solution looking for a problem.

Nothing has happened to allay concerns that if a CBDC were to be introduced, the government would respect the public’s financial privacy and autonomy.

The last government said that privacy would be a core design feature of a digital pound and that legislation would guarantee users’ privacy, but also that “given laws to fight financial crime, it would not be anonymous.”

It then went on to prepare legislation that would give the Department for Work and Pensions the ability to surveil the bank accounts of benefit recipients and potentially those of the whole population – a plan eagerly taken on by the incoming Labour government.

The worst-case scenario is that government would use “programmability” – a key potential feature of CBDCs – to put limits on people’s spending.

In 2021, former deputy Bank of England governor Sir Jon Cunliffe said that government should consider programming a digital currency for commercial or social purposes: “You could think of giving your children pocket money, but programming the money so that it couldn’t be used for sweets.”

In it’s latest update, the Bank of England states:

“A digital pound would only be introduced with Parliament’s approval, requiring primary legislation. This legislation would safeguard users’ privacy, guaranteeing that neither the Bank nor the Government could access users’ personal information nor control how households and businesses use their money.”

Which sounds OK – if you forget for a second that a) legislation is changed all the time, and b) the state often uses the “private sector” to do its dirty work.

Consider that with a retail CBDC, individuals and retailers would be making transactions through intermediaries – digital “wallet” companies who could build restrictions into their terms and conditions. Is it feasible that government would “encourage” them in certain directions? Bet your bottom dollar that it is.

Imagine a re-run of Covid hysteria under CBDCs. How much pressure would wallet companies be under to prevent individuals using their money say 5 miles from their residence… or on “non-essential” items, per Mark Drakeford?

A CBDC seems to combine the worst of both worlds, threatening both centralised control by the state but also access to your extremely sensitive data for private companies.

“No decision has been made on whether to proceed with a digital pound. After completing the design phase over the next couple of years, including taking account of developments in the wider payments landscape, the Bank and Government will assess the policy case for a digital pound and determine whether or not to proceed,” the Bank claims. And Dominic Frisby, for one, is optimistic (“The Orwellian Nightmare of Central Bank Digital Currencies – And Why It Won’t Happen”).

As the Bank’s progress report makes clear, the “national conversation” – the real dialogue with the public about a CBDC – has yet to begin.

Essentially this means: will the British public go for it? CBDCs are an experiment and, like all financial systems, they depend on public trust.

As this CBDC tracker shows, only a few governments have launched CBDCs while a couple of countries have already abandoned plans to introduce them. Denmark’s Central Bank concluded that a CBDC was unnecessary and could lead to economic instability. As this article makes clear, Nigeria’s CBDC is faltering due to a lack of public trust: “Nigerians do not have faith in the naira or the central body that controls it. He said that adopting the eNaira will only happen when the government gains the trust of Nigerians and the naira attains a more trusted status.

So there is everything to play for. In the UK, many people are already voting against CBDCs with their wallet – the use of cash is on the rise.

While the politicians and media are keeping very quiet about CBDCs, it’s down to us to make our voices heard and assert ourselves. This has to be about what WE want – not what suits the technocrats.

There’s no consultation to respond to at this point – although if you do have something to say to the Bank of England at this stage, you can email them at [email protected].

But we do need to push on, making more people aware of the potential dangers of a British CBDC and letting the politicians know we won’t accept being led towards digital dystopia, whether by design or negligence.

Together has consistently highlighted the possible risks of a CBDC as a threat to our freedom and privacy. We’re up against powerful forces – and we don’t have the resources of government or big business to communicate our message.

We are run by a tiny core team, carefully. We don’t waste money on fancy offices or unnecessary expenses, but we do need a certain amount of money to keep going.

And at a key time in the life of the UK, we need to expand and make even more of an impact.

The best way to support us in this fight is by becoming a Together member HERE.

Featured image: therooster.com

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