The House of Lords Economic Affairs Committee concluded that a CBDC "would have far-reaching consequences for households, businesses and the monetary system for decades to come."
Politicians in the U.K. have warned a central bank digital currency "could present significant challenges for financial stability and the protection of privacy."
In a detailed report setting out the pros and cons of a digital pound, the House of Lords Economic Affairs Committee concluded that a CBDC "would have far-reaching consequences for households, businesses and the monetary system for decades to come."
While the authors acknowledged that a CBDC could reduce the transaction fees that businesses pay — savings that could ultimately be passed on to the public — there appears to be "few other significant advantages for U.K. consumers."
The committee also noted growing concerns that tech giants including Meta are taking steps to launch their own digital currencies, but said "the introduction of a CBDC may not be a necessary or complete response."
There could also be ramifications if consumers hold their savings in digital pounds rather than in a conventional bank account — potentially "exacerbating financial stability" and making it more expensive and difficult to borrow money.
Despite the largely negative stance towards CBDCs, the committee said it recognised that "consumer payment preferences, technological developments and the choices of other countries may enhance the case for a U.K. CBDC in the future."
Just some of the use cases set out for the so-called "Britcoin" include a modernization of the way taxes are received, sweeping changes to the way welfare payments are made, and the introduction of micropayments.
AJ Bell's head of investment analysis Laith Khalaf explained: "This could be useful for low-value commercial transactions, opening up the potential for customers to pay small amounts of money for a fleeting service, like reading a solitary news article instead of paying a monthly subscription."
Data from the Atlantic Council reveals that dozens of countries around the world are currently looking into central bank digital currencies.
Nine CBDCs have launched, while 14 pilot programs are currently taking place. A further 16 digital assets are in development, and 41 nations are at the research stage.
China is especially ahead of the curve when it comes to launching a central bank digital currency — and the digital yuan is set to have a big role at the Winter Olympics in Beijing next month.
Some CBDC advocates have argued that the U.K. and the U.S. are lagging behind when it comes to development — not least because these projects can take years to build.
The Federal Reserve is set to publish an in-depth report into the pros and cons of a digital dollar within months, but the central bank remains on the fence when it comes to launching one.
Jerome Powell, the Fed's chairman, told the Senate Banking Committee on Tuesday that he believes privately issued stablecoins could operate in tandem with an official CBDC provided that it was well regulated.