U.K. Finance, one of the largest finance membership organizations in the U.K., has issued its recommendations to the Bank of England regarding the issuance of a digital pound. The organization stated that individual holdings of the proposed central bank digital currency (CBDC) should be capped at £5,000 ($6350) to avoid panic and deposit flight.
U.K. Finance Recommends Capping Digital Pound Holdings to £5,000
The proposal for issuing a digital pound, a UK-issued central bank digital currency (CBDC), is already being debated by financial organizations in the country. U.K. Finance, one of the largest financial membership organizations in the U.K., has issued its answer to a consultation of the Bank of England on the hypothetical launch of a digital pound.
U.K. Finance, representing more than 300 firms in the financial industry, disagreed with the limits recommended by the Bank of England regarding the maximum amount of funds individuals should be allowed to hold in this proposed currency.
While the bank proposed to cap off these holdings at a temporary limit of £10,000 – £20,000 ($12,700 – $25,400), U.K. Finance proposed this number to be way lower, capping it to £5,000 ($6,350) instead to avoid panic in financial stress situations.
The organization further stated that a digital pound could “exacerbate” deposit flight in certain situations.
The Digital Pound Project and Criticism
While some central bank digital currencies are already in advanced stages of research and implementation, the digital pound was just announced back in January, when the U.K. government announced it was mulling issuing such a currency and informed about the start of a consultation period on the attributes that a digital pound should have.
The digital pound, dubbed “britcoin” by U.K. Prime Minister Rishi Sunak, is now in its initial design phases and is estimated to be issued at the end of this decade. However, it has already started to worry British lawmakers, who consider that the country could use other resources in the war against the introduction.
Michael Forsyth, chair of the Economic Affairs Committee chairperson in January, stated they “were really concerned” by several risks posed by issuing a CBDC.
A recent survey conducted by cryptocurrency wallet company Trezor revealed that U.K. citizens are also concerned about the power a digital pound would give the government. 73% of the polled were concerned about U.K. authorities being able to control access to their funds, while 67% mentioned being worried about possible time limits on spending.
What do you think about U.K. Finance’s recommendations on digital pound holdings? Tell us in the comment section below.
