A report released by the U.K.’s All Party Parliamentary Group on crypto and digital assets urges the government to carefully consider the introduction of a CBDC, or “digital pound.”
In a comprehensive analysis of CBDCs, the U.K.’s All Party Parliamentary Group on crypto and digital assets (APPG) has stressed the necessity for the government to tread carefully when contemplating the implementation of a digital pound.
The report, presented on June 5, pinpointed potential risks related to financial stability, privacy, and security.
The APPG, a cross-party association within the U.K. Parliament that encompasses members of parliament and lords, provides insights and recommendations for decision-makers.
In their report, the group emphasized the need for the introduction of a digital pound to respect and not hinder private sector innovation.
The 52-page document, “Realising Government’s Vision for the U.K. To Become a Global Hub for Cryptocurrency & Fintech Innovation,” reports on the findings of the APPG’s year-long inquiry into the digital asset industry’s status in the U.K.
The inquiry, led by Dr. Lisa Cameron MP, received inputs from a range of industry stakeholders, including operators, regulators, experts, and the public, as part of its aim to understand the necessity of regulation.
Public evidence sessions were also conducted, where industry experts conveyed insights on pivotal considerations for the government to achieve its vision for the sector.
The APPG called for swift action from the U.K. to become a “global crypto asset technology hub.” The initiative, first announced in April 2022 by the then-chancellor and current prime minister Rishi Sunak, aimed to foster an environment conducive to innovation and scaling up for firms.
The report supports these ambitions, underscoring that cryptocurrencies have the potential to revolutionize the existing financial services system.
However, the report emphasizes that realizing this potential requires comprehensive regulation to safeguard consumers and establish safeguards for economic growth and investment.
“Various countries worldwide have promptly developed clear regulatory frameworks, offering the necessary clarity that attracts companies. The UK has a limited window of opportunity of 12-18 months to establish early leadership in this sector.”
APPG report on CBDCs.
The report advises the government to cultivate conditions that attract investment in the U.K.’s cryptocurrency and digital asset sector, while simultaneously supporting existing businesses to prevent losing advantages to other jurisdictions.
While acknowledging that the U.K. is in the nascent stages of industry regulation, the report urges continued development of a comprehensive framework providing regulatory clarity, which will be instrumental in attracting inward investment.
While acknowledging that crimes associated with cryptocurrency and digital assets form a relatively small fraction of overall activity, the report warns of the potential for misuse by criminals.
Consequently, the report recommends that the government adopt a balanced, risk-based approach to address potential risks and establish a robust evidence base concerning economic crime to shape its regulatory response.