A Central Bank Digital Currency (CBDC) is a new type of digital money issued by a central bank, like the Bank of England, rather than commercial banks such as Lloyds or Barclays. Unlike traditional money, a CBDC is accessed digitally via devices like computers or phones. Unlike cryptocurrencies like Bitcoin, which operate independently, CBDCs are regulated by state-owned banks, permitting government oversight of public financial activities.
The introduction of a CBDC is a controversial move. Critics say that it infringes on public privacy as the government will have access to vast amounts of personal data from everyday transactions. This means more insight into the public’s income, identity, and transactions, potentially leading to increased state surveillance. The Bank of England, along with over 90 central banks worldwide, is already researching, developing, or piloting CBDCs.
One of the major concerns with a UK CBDC is the lack of evidence supporting such a transformative change. Critics argue that it could harm privacy, human rights, and security, and irrevocably alter the citizen-state relationship. The potential for programmable money or welfare payments also poses the risk of financial control, invasion of privacy, and threat to various fundamental rights, such as freedom of expression and assembly.
The launch of a CBDC in the UK would likely necessitate a comprehensive digital identity system, posing risks of surveillance, security breaches, identity theft, and discrimination. The exploitation of personal data for marketing purposes could lead to further surveillance and invasion of privacy. Security risks also loom large, as a CBDC system would become a prime target for cyberattacks. Critics urge democratic scrutiny and involvement of Parliament in the decision-making process regarding the development of a CBDC.
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