‘Britcoin’ Risks Increased State Surveillance of People’s Spending Habits

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State surveillance of people’s spending habits and financial instability could result from the creation of a ‘Britcoin’ Central Bank Digital Currency (CBDC), a House of Lords committee has warned.

A CBDC would pose “significant risks”, according to the Lords Economic Affairs Committee, and would have “far-reaching consequences” for individuals and businesses in the UK.

In report released as the Bank of England (BoE) continues to explore the introduction of a CBDC, the committee said: “These risks include state surveillance of people’s spending choices, financial instability as people convert bank deposits to CBDC during periods of economic stress, an increase in central bank power without sufficient scrutiny, and the creation of a centralised point of failure that would be a target for hostile nation-state or criminal actors.”

The committee also found that BoE Governor Andrew Bailey, economic secretary to the Treasury, John Glen, and other witnesses, had failed to make a convincing case for a ‘digital pound’ at this stage.

However, a BoE task force will continue to explore a CBDC and will report back to the committee at a later stage.

Laith Khalaf, head of investment analysis at AJ Bell, told Sky News that a CBDC could bring a range of benefits.

He said: “A digital currency could also facilitate micropayments, which could become more economical if the digital currency is successful in driving down transaction charges.

“This could be useful for low-value commercial transactions, opening up the potential for customers to pay small amounts of money for a fleeting service, like reading a solitary news article instead of paying a monthly subscription.

“However, these potential benefits do need to be weighed up against the risks.

“Particularly when you also consider that any sweeping financial innovation is likely to be a rallying cry for scammers, who will flock to the scene of any confusion to misappropriate funds wherever possible.”