Central Bank Digital Currency

Lord Sarfraz Excerpts

Tuesday 13th April 2021 Lords Chamber

Asked by

[Lord Sarfraz]

To ask Her Majesty’s Government what assessment they have made of a Central Bank Digital Currency.

[Baroness Penn (Con)]

My Lords, the UK, like many countries globally, is actively exploring the potential role of central bank digital currencies. A CBDC would be an electronic form of central bank money, like cash, that households and businesses could use to make payments. The Bank of England published a discussion paper in March 2020 exploring the possibility of a UK CBDC, and the Treasury and the Bank are working together to consider next steps.

[Lord Sarfraz (Con)]

My Lords, I thank the Minister for her Answer. Does she agree that a digital pound held in an electronic wallet could considerably reduce bank fees and currency risks for businesses buying and selling overseas and, when combined with smart contracts, reduce friction in trade finance? Does she agree that a digital pound could benefit individuals who suffer from exchange losses in foreign transaction fees when travelling?

[Baroness Penn (Con)]

I agree with my noble friend that CBDCs could present a number of benefits, which the Treasury and the Bank are continuing to explore. These may include supporting resilience, innovation, competition and payments, potentially including reducing costs in domestic and international payments. The Bank of England’s paper last year noted the potential for CBDCs to enable smart contracts, including in relation to the supply and delivery of goods.