The digital pound should not be widely used initially to avoid the risk of bank runs, British lawmakers said in a report on Saturday, which also highlighted the need to protect cash and user privacy. An electronic form of the pound could emerge in the second half of the decade, the Bank of England and the Treasury say, as 130 countries consider similar moves to keep up with advances in payments technology.
But lawmakers on the Treasury select committee said in the report that while a digital pound could bring benefits in terms of promoting innovation, the Bank of England and the Treasury should keep an open mind on whether it is actually needed, given the costs involved.
Individuals and businesses can make payments using digital pounds, and the Bank of England recommends that digital wallets provided by banks have a limit of up to 20,000 pounds, much higher than the 3,000 euros discussed by the European Central Bank for a digital euro.
The prospect of a digital pound, currently in the design stages, has sparked fears it would allow authorities to monitor how people spend their money and could spell the end of cash.
"We recommend that any major legislation used to introduce a digital pound would not allow the government or the Bank of England to use digital pound data for any purpose that is already permitted by law enforcement," the report said.
The Bank of England said no interest should be paid on digital pound deposits, but the committee said the position should be reviewed.