Saturday, July 20, 2024

UK Finance, one of the most influential finance membership bodies in the country, has forwarded its recommendations to the Bank of England about the issuance of a digital pound. They suggest that personal holdings of the proposed central bank digital currency (CBDC) should not exceed £5,000 ($6350) to stave off potential financial panic and deposit flight.

UK Finance Advises a £5,000 Limit on Digital Pound Possessions

Debate on the issuance of a digital pound, a UK-made central bank digital currency (CBDC), has been ongoing among the nation’s financial bodies. UK Finance, a prominent finance membership group, has responded to the Bank of England’s consultation on the potential introduction of a digital pound.

Representing over 300 firms in the finance sector, UK Finance disagrees with the Bank of England’s suggested cap on individual holdings of the proposed currency.

While the bank suggested a temporary limit of £10,000 – £20,000 ($12,700 – $25,400), UK Finance advised a significantly lower cap of £5,000 ($6,350) to prevent potential financial panic during periods of stress.

The organization also stated that a digital pound could “amplify” deposit flight in certain circumstances.

The Digital Pound Initiative and its Criticisms

Despite certain central bank digital currencies being at advanced stages of research and implementation, the idea of a digital pound was only announced in January. At that time, the UK government declared it was considering issuing such a currency and commenced a consultation period on the features of a digital pound.

The digital pound, cheekily named “britcoin” by UK Prime Minister Rishi Sunak, is currently in its early design stages and is projected to be issued by the end of this decade. However, it has already raised concerns among British lawmakers who believe the country could better utilize its resources.

Michael Forsyth, chair of the Economic Affairs Committee, expressed serious concerns in January about various risks associated with issuing a CBDC.

A survey conducted by cryptocurrency wallet firm Trezor also revealed UK citizens’ concerns about the power a digital pound could confer on the government. 73% of respondents were apprehensive about UK authorities controlling access to their funds, and 67% expressed fears over potential spending time restrictions.

What’s your take on UK Finance’s recommendation for a £5,000 cap on digital pound holdings? Share your thoughts in the comment section below.

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