Digital Pound

Abena Oppong-Asare Excerpts

Tuesday 7th February 2023 Commons Chamber

[Abena Oppong-Asare (Erith and Thamesmead) (Lab)]

I also want to put on record that my thoughts and prayers are with those affected by the earthquake in Turkey and Syria.

Labour welcomes that the Bank of England will be exploring the potential benefits of a central bank digital currency, or CBDC. With the rise of digital payments, and with the European Union, the US and China all exploring the use of CBDCs, we recognise the growing case for a state-backed digital pound to protect the integrity and sovereignty of the Bank of England and the UK’s financial and monetary system.

We fully support the Bank of England’s work on this area, but there are important questions that must be addressed before we decide whether the potential benefits of implementing a new payments infrastructure outweigh the risks. First, how will the Government ensure a digital pound guarantees the privacy of the public? Will people be able to freely access a digital pound from trusted institutions such as the Post Office, and not be forced to pay or hand over their data to tech companies? The take-up of a future digital pound will depend on public trust. People must know that their privacy will be protected.

Secondly, what work are the Government going to do to ensure that the potential CBDC does not accelerate financial exclusion? Millions of people are already cut off from the goods and services they need because of the decline of free access to cash. We need a cast-iron guarantee that the CBDC will not distract from work to promote digital inclusion or undermine protections for cash infrastructure. A digital pound must never replace physical money. We also know that around 5 million people are put off by digital banks. How will the Government ensure that those individuals are included in the Government’s joint consultation with the Bank of England?

The Economic Affairs Committee in the other place and officials at the Bank of England itself have warned that a digital pound could pose a risk to households and companies if they all withdrew money from commercial banks at once to put it into a Government-backed digital pound. What work will the Government be doing to put measures in place to protect against that?

I now turn to some of the inconsistencies between today’s announcement and the Government’s wider approach to cryptocurrencies. As the Bank of England made clear in its statement yesterday, one of the potential benefits of a state-backed digital pound is that it would have intrinsic value and not be volatile, unlike unbacked cryptoassets. That approach is welcome and contrasts with the Conservative Government’s promotion of the crypto wild west. I know that the current Prime Minister likes to see himself as a bit of a Californian tech bro, but in reality this is naive. This out-of-touch Government continue to waste taxpayers’ money and time on an NFT gimmick, and to promote dodgy stablecoins, despite millions of UK consumers’ savings being put at risk by scams and scandals in the crypto sector, and by the collapse in the value of cryptocurrencies.

I hope today’s announcement marks a break with this disastrous approach. The Government should be focusing on returning the economy to growth and dealing with the cost of living crisis, not chasing crypto fantasies. Only Labour has a serious plan for growth. A Labour Government will attract fintech companies to the UK by safely harnessing the potential of new technologies and through our ambition to make Britain the home-grown start-up hub of the world.