The post Lawmakers in the U.K. Urges Caution on Design of Digital Pound appeared on BitcoinEthereumNews.com.

Central Bank Digital Currency (CBDC) is a form of virtual currency authorized by government agencies and will have the features of traditional crypto assets. Countries all around the world are working towards developing the infrastructure dedicated to the new age currencies and taking advantage. Recently, the CBDC initiative in the United Kingdom saw development.  In their report, lawmakers from the Treasury Committee of the House of Commons emphasized the importance of addressing potential issues surrounding the digital pound, particularly regarding the earning of interest. The UK government’s clear stance that the digital pound, akin to cash, would not accrue interest has drawn scrutiny.  The legislators have urged both the Bank of England and the Treasury to conduct an in-depth analysis of the monetary policy implications of allowing the digital pound to earn interest. This recommendation underscores the need for a comprehensive understanding of the potential impacts on the broader financial landscape before finalizing the design and operational aspects of the digital pound. Furthermore, lawmakers expressed reservations about the proposed holding limit of £10,000-£20,000, emphasizing the need for a cautious approach to mitigate the risk of significant outflows from traditional bank deposits to digital pounds.  By proposing a lower limit, aligned with the EU’s European Central Bank’s recommendation of a €3,000 cap for the digital euro, UK legislators aim to strike a balance. This approach aims to reduce potential disruptions to the existing financial system while allowing flexibility for future adjustments based on evolving market dynamics. As the global landscape witnesses a growing interest in central bank digital currencies (CBDCs) as a means to enhance payment systems and embrace the digital era, the UK’s deliberations underscore the complexities involved in balancing innovation with financial stability.  The nuanced recommendations from the Treasury Committee reflect a forward-looking perspective, acknowledging the potential of CBDCs…

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Filed under: News - @ December 4, 2023 4:12 pm