The Great Digital Pound Debate, Considering A New Institution: An Interview with Danny Kruger MP

Reservations, Threats & Benefits

In a recent conversation with Danny Kruger, a member of the Treasury Select Committee, we delved into the Bank of England’s Digital Pound Project and the broader implications of Central Bank Digital Currencies (CBDCs). This discussion is particularly timely, given that the Bank of England has recently put forward its latest digital Pound design iteration for consultation, which concludes on the 7th of June.

Danny expressed reservations about the potential threats and benefits of a digital pound. He made the compelling argument that “the UK should not adopt a digital currency simply because other nations are doing so.”

Instead, he emphasised the necessity for the UK to “remain at the cutting edge of financial technology and market developments.” He acknowledged the potential advantages of being a pioneer in this space, but also recognised the possible pitfalls.

We need to remain at the cutting edge of financial technology and market developments but… The UK should not adopt a digital currency simply because other nations are doing so @danny__kruger Click to Tweet


The Case for Wholesale and Retail CBDCs

Kruger sees potential value in a wholesale CBDC for bank-to-bank systems for transferring money and settling transactions. However, he believes “the case for a retail CBDC is not yet made and sees it as a solution looking for a problem.”

The case for a retail CBDC, in answer to your question, I don’t think has yet been made. It does have the sense of a solution looking for a problem @danny__kruger Click to Tweet


Economic Stability and Liberty
Kruger’s concerns extend to economic stability and liberty. He questioned “what it would mean for the banking sector if a new form of digital cash, potentially more secure than commercial money, was introduced.” He also expressed apprehension about the implications for individual freedom if “people are encouraged or required to hold their wealth in this new form.”

There's a financial stability question. And then the other that’s more obvious and pertinent is liberty. What does it mean for you and me if we are being encouraged, or at what points does it become required, to hold our wealth in this new form? And what powers does government have to oversee these transactions @danny__kruger Click to Tweet


The Need for Offline Transfers
In our conversation, I raised the issue of the need for offline transfers, i.e., phone-to-phone, if all other systems are down. I also questioned whether the Treasury Select Committee has the support and expertise needed to properly deliberate on such a significant change.

The Role of Parliament
Kruger believes that “the decision to move from a non-programmable decentralised CBDC to a centralised programmable one should be made by Parliament.” He expressed concern that the political culture and the right questions are not currently in place to ensure this happens.

The Magnitude of Change

Both Kruger and I agree that “the introduction of a CBDC is a major change and not just a small technical adjustment.” We agreed that it requires serious consideration at the legislative level due to its potential to affect democracy and the functioning of society for generations to come.

The Urgent Call for Good Governance

Our conversation underscored the urgent call for good governance in the advent of CBDCs. The Bank of England’s design alone is not sufficient. The malleability of these currencies leaves them vulnerable to re-engineering, potentially compromising the safeguards initially in place.

The Need for a Dedicated Commissioner for Digital Money

To address these critical concerns, I have advocated for the creation of a dedicated body: the UK Office of the Commissioner for Digital Money – playing a role parallel to the Office of the Information Commissioner (ICO). As I explained, the commissioner would play a pivotal role in ensuring transparency and accountability among all stakeholders, including the Bank of England, the Treasury, and the government. Asking, “Do you think that’s worthy of consideration?” His answer: “ Yes, I do. I think that is a good suggestion, a digital commission of some sort.”

They said to us the introduction of a digital pound will not, in itself, increase the reduction in the use of cash when, of course, it will. It's unthinkable that it wouldn't. This will further squeeze cash out of the system @danny__kruger Click to Tweet

Embracing the Future Responsibly

As we stand on the cusp of another digital revolution, we must proceed with caution. The digital pound holds the promise of a more efficient financial landscape, but without the proper governance infrastructure, it also poses significant threats to democratic freedoms.

Having Your Say

The Bank of England’s consultation is an opportunity for UK citizens to have their say and for those from elsewhere to give thought to the issues raised here. As we move ahead, it is crucial that “our digital future is built on a foundation of accountability, transparency, and democratic principles.”

China is going full ahead. That in itself should cause us to pause and think about what we're doing @danny__kruger Click to Tweet

 


 

 

Barry E James, Founder Humane Economics, Industrial Fellow at Royal Docks School of Business and Law at the University of East London. Views expressed here are my own and not necessarily those of the organisations I lead or support. James’ full interview with Kruger may be listened to here.

 


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