The UK’s expedition into releasing a digital pound has triggered a strong debate among policymakers and finance experts. The House of Commons Treasury Committee has shown concerns, cautioning that bringing a central bank digital currency (CBDC) in the UK could lead to major risks to personal privacy and financial stability.
While HM Treasury and Bank of England are conducting their investigations into a digital pound, experts are suggesting to be on alert, underscoring the potential threats and downfalls of such a step. This blog will provide a comprehensive guide to explain how digital pound can threaten financial stability.
Worries about data privacy and stability
One of the main issues around the digital pound is the consequences it can have on traditional banking systems. Experts are worried that during times of financial crisis, individuals might quickly transfer large amounts of money to digital pounds from conventional bank accounts.
If that becomes the case, it can result in increased vulnerability to bank runs, triggering imbalances in the financial system. Besides these, there are major concerns about how authorities would use the personal data of digital pound users. The chances of government surveillance and abuse of financial transaction data have raised concerns over individual privacy rights.
This worry is underscored by the push to make a universally accepted, risk-free electronic
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