Template Response to the Bank of England’s Digital Pound Consultation
Template Response to the Bank of England’s Digital Pound Consultation
The Bank of England (BoE) is conducting a disingenuous consultation process on its proposal for a retail Central Bank Digital Currency (CBDC) or ‘digital pound’. I say ‘disingenuous’ because the parameters of the debate, as framed by the questions to which it has invited responses, have been undemocratically limited: they focus solely on how the project should be implemented and there is no option to reject the whole deeply flawed concept in its entirety. Below is a link to the home page of the BoE’s consultation:
https://www.bankofengland.co.uk/paper/2023/the-digital-pound-consultation-paper
I wrote a piece setting out in more detail why the BoE’s proposal for a retail CBDC should be met with wholesale rejection. You can read that piece here. Below is a suggested response to the BoE ‘consultation’ paper which you can copy and paste to an email and tailor as you see fit.
The deadline for sending your response is 7 June 2023.
If you decide to email this response, or an amended version of it, to the BoE, remember to insert your name at the end. The absence of a name and post code/address may invalidate the response.
Email to: Digitalpoundconsultation2023@bankofengland.co.uk
and
[Subject header:] Response to BoE Digital Pound Consultation Paper
In line with the increasingly authoritarian trend in government ‘consultations’, all your consultation questions presuppose that the project for a CBDC or ‘digital pound’ should be implemented, and you seek opinions only on how this should happen. Disappointingly, you have provided no option to reject the proposal in its entirety.
The framing of your consultation is therefore highly undemocratic, and your questions are irrelevant to my viewpoint because I am strongly opposed to the development of a retail central bank digital currency (CBDC) or ‘digital pound’. I set out below my reasons, relevant observations, and source references to support my conclusions.
On the home page of your consultation website, you claim that “the digital pound would be a new form of sterling”.
https://www.bankofengland.co.uk/paper/2023/the-digital-pound-consultation-paper
This claim is misleading since a CBDC is not a currency. It is a digital payment system. Sir Jon Cunliffe, Deputy BoE Governor for Financial Stability, clarified this in oral evidence given to the House of Lords Economic Affairs Committee. He stated that he “would probably refer to it as central bank digital money, because money is a means of payment, rather than central bank digital currency”.
https://committees.parliament.uk/oralevidence/3062/html/
2. This is an important distinction which highlights that the BoE is seeking to make fundamental changes to payment systems in the UK. However, these systems are already reliable and efficient. There is no pressing need for an intervention in these systems and this was in fact the finding of the House of Lords Economic Affairs Committee in a report it issued in January 2022.
3. The committee concluded that the project is a “solution in search of a problem” and that the “concept seems to present a lot of risk for very little reward.”
4. Given that there is little or nothing to be gained from introducing a digital payment system such as the ‘digital pound’, we should critically examine the key characteristics that distinguish this new system from existing payment systems. A key distinguishing feature of a CBDC is its programmability. The issuer of the CBDC – the government, through its proxy the BoE – will have the ability to apply restrictions over the digital wallet that can set limits on how, when, where and if individuals can spend the money in their digital wallet.
5. This functionality clearly has the potential to be combined with a wider digital ID system that could integrate the identity of each financial CBDC account with the holder’s wider online identity and activity. The FT rightly points out that “this has the potential to become as severe a restriction on personal freedom as China’s “social credit” system.”
https://www.ft.com/content/96b14a1d-c9ad-4c55-8494-741c9adf8220
6. While the BoE is portraying this dystopian project as a benign programme to improve payment efficiency, the reality is that it represents an extremely threatening shift in one of the primary functions of money – from a medium of exchange to a medium of control.
7. Given the choice between accepting assurances that the government of the day would not deploy these frightening features or simply preventing this technology from seeing the light of day, choosing the latter is by far the wiser and safer option. The Government will always grasp power within its reach when it is expedient to do so for the purpose of achieving its policy objectives.
8. I am of the view that the ‘digital pound’ project is distracting both the public and the BoE from far greater threats to financial stability. These threats stem from the BoE’s monetary expansion policies which began in the first Global Financial Crisis (GFC) of 2008 and have continued ever since.
9. Figures from Statista show that UK public sector net debt has risen from £0.7 trillion in 2008 to £2.4 trillion in 2023 (an increase of £1.7 trillion). The cumulative value of the BoE’s quantitative easing (creation of digital money) rose from £200 billion in 2009 to £895 billion in November 2020 (an increase of £695 billion). The UK’s M2 money supply has grown from £2.1 trillion in January 2010 to £2.9 trillion in November 2021 (an increase of £800 billion). Meanwhile, GDP growth has been extremely sluggish by comparison: GDP grew from £1.9 trillion in 2008 to just under £2 trillion in 2020, rising to £2.2 trillion in 2022.
With inflation running at over 10% and Britain forecast to be the only G7 economy to shrink in 2023, it appears that the BoE’s monetary expansion policy has contributed to the current economic stagflation.
https://www.statista.com/statistics/282647/government-debt-uk/
https://www.statista.com/statistics/922225/uk-banking-total-money-supply-m2/
https://www.statista.com/statistics/281744/gdp-of-the-united-kingdom/
10. There have been at least 3 significant bank collapses in the US since March. The interconnectedness of our global banking system obviously presents a contagion risk for the UK and yet the BoE Governor implausibly denied that the financial sector is heading towards a fresh crisis.
11. The public needs to know that the 2008 GFC crisis has not been resolved and that the BoE is doing nothing to address the financial instability that has persisted ever since. It is patently obvious that the BoE should be applying its resources to preparing for the threat of another banking crisis instead of spending the taxpayers’ money on planning for our imprisonment in a CBDC digital gulag.
[Name]
[Address/Post code]