The development of a state-backed “digital pound” should proceed with caution, MPs have warned.
The benefits of the currency are still unclear and, if launched, there must be systems in place to protect cash access and privacy, the Treasury Committee said in a report.
The Bank of England and the Treasury have been consulting on the idea since February.
They are currently designing what such a system could look like.
The design phase is expected to run until the middle of the decade and the currency could be launched before 2030.
A central bank digital currency (CBDC) for use by households and businesses would sit alongside cash and bank deposits, rather than replacing them, but details are still being worked out.
The CBDC would be directly issued by the Bank of England, just like banknotes.
This means people would have all the same safety and security that they have with their cash currently, which is different to cryptocurrencies that fluctuate in value and are generally run by private companies.
MPs on the Treasury Committee said there were “some potential benefits” of the system, including that it could help create innovation in payments and help the UK’s global competitiveness.
But they said questions remain over whether the positive impacts outweigh the risks and costs.
“The extent of these benefits is unclear, however. Nor is it yet clear that a digital pound is the only (or best) means of achieving them,” they said.
The report warned that the new currency could be very traceable and give authorities access to a lot of new data about people, which could be misused.
The committee also warned that the introduction of a CBDC could end up speeding up the demise of physical cash, something that a lot of people still rely on.
Chair of the committee, Harriett Baldwin, said that the positives of a CBDC to the UK economy would have to be demonstrated before any decision to introduce it was made.
“We must also keep a close eye on ensuring that any retail digital pound does not worsen financial exclusion for those reliant on physical cash. The digitisation of money can’t, in any way, leave those people behind,” she said.
Bank branches across the UK have been closing down in their hundreds in recent years, making it more difficult to access cash and banking services.
Around 130 countries around the world are exploring the potential of CBDCs, according to the Atlantic Council think tank.
So far 11 countries including Nigeria and Jamaica have launched one, and 21 including China, Australia and South Africa are piloting one.