The Bank of England’s prospective digital pound, dubbed “Britcoin” by Prime Minister Rishi Sunak, heralds a transformative shift in the financial ecosystem, increasing government control over financial transactions. This is according to Susie Violet Ward, a financial analyst, who expressed her concerns on NTD’s “British Thought Leaders” programme.

An unprecedented 130 nations are exploring central bank digital currencies (CBDCs), as the Atlantic Council reports, and the BoE is at the forefront of the movement. Still in the deliberation phase, the Bank and the Treasury are examining public opinions about the implementation of Britcoin.

If Britcoin becomes a reality, it could supplement physical cash within a few years. Issued by the BoE and backed by the Treasury, digital wallets, provided by private fintech firms and banks, would facilitate transactions.

The digital pound would differ from decentralised cryptocurrencies such as Bitcoin by eschewing anonymity, a feature that safeguards privacy but can also be exploited by criminals. Britcoin’s programmable infrastructure could allow digital wallet providers to offer additional functions like budgeting tools. However, this programmability leads Ms. Ward to fear a world in which the government could dictate people’s spending habits, even potentially enforcing expiration dates on funds.

Although the BoE and the UK government have assured that personal data will remain private except for limited, law-prescribed circumstances, Ms. Ward remains sceptical. She asserts that digital wallet providers will be “subject to the law,” allowing the government to halt or impede transactions if deemed necessary.

Invoking the Chinese social credit system and recent pandemic-induced restrictions, Ms. Ward cautions against possible government overreach. For instance, spending limits could be implemented based on environmental impact, curtailing consumers’ ability to purchase meat or limit travel for those who fly frequently.

These concerns exist within the current financial system where most transactions are digital. However, according to Ms. Ward, a CBDC system would amplify these risks by streamlining the government’s ability to control personal accounts. Moreover, she suspects that physical cash will be phased out despite the BoE’s insistence that it will issue cash “for as long as people want to keep using it.” She criticises the complexity of the public consultation documents and the media’s lack of in-depth coverage as barriers to public understanding.

The concept of digital money with an expiration date has stirred international debate, with the World Bank, the Chinese regime, and the Bank of Canada exploring its implications.

With the decline of cash and the rising prominence of bank deposits, BoE Deputy Governor Jon Cunliffe notes that approximately 95% of money in circulation in the UK is ‘private money’ created by commercial banks. This trend, along with the proliferation of largely unregulated digital currencies from tech giants, has provoked concerns about losing control over monetary systems.

The BoE argues that a CBDC could bolster trust in money and secure the UK’s financial system. However, this position has not swayed the House of Lords Economic Affairs Committee. They believe that large private entities can be regulated to compete with existing payment systems, and have yet to see a compelling case for the necessity of a CBDC.

Their report outlines the potential risks of a CBDC, such as increased state surveillance, financial instability during economic crises, a consolidation of power within the central bank without sufficient oversight, and creating a centralised point of failure ripe for attack by hostile actors.

Financial services minister Andrew Griffith echoed the committee’s apprehension in a July 4 hearing, advising that the UK should “proceed cautiously” in terms of CBDCs. While the digital frontier of financial systems may be closer than ever, the exact shape it will take and the implications it will have on society remain to be seen.