Privacy Concerns Echo in UK’s Digital Pound Consultation: Insights from Bank of England

The Bank of England (BOE) has revealed that during a public consultation on the digital pound, approximately 50,000 responses were received from concerned citizens, and a significant portion of these was centred around privacy and worries about fiat scarcity. 

Jon Cunliffe, the bank’s Deputy Governor, addressed these primary concerns during a speech titled “Money and payments: a ‘black ships’ moment?” on October 26, emphasizing the critical roles of central banks in cross-border payments, stablecoin regulations, and Central Bank Digital Currencies (CBDC).

Cunliffe stressed that the feedback received during the consultation focused largely on privacy. He emphasized the importance of public consultation to understand the public’s expectations and concerns related to the potential launch of the digital pound. The goal is to address these issues and instil confidence among users about the privacy safeguards in a prospective digital currency.

“Users would have at least the same, if not greater, protection of their privacy that they enjoy today when they make electronic payments.”

The proposed model, as detailed in the consultation paper released earlier, aims to mitigate privacy concerns by ensuring that neither the central bank nor the government will have access to user data. 

Instead, the suggested model involves the engagement of private entities to manage user data, mirroring the framework in the commercial banking system. This approach is designed to provide users with heightened privacy and security when making electronic payments.

Cunliffe emphasized the model’s intent to maintain, if not improve, the level of privacy that individuals currently enjoy when conducting electronic payments, assuring that users would benefit from robust privacy protection in any potential digital pound system.

Addressing Fiat Scarcity and Development Roadmap

The issue of fiat scarcity was also a point of concern among respondents. Cunliffe assured the public that the Government has passed legislation to ensure the availability of fiat currency, reassuring that the Bank will continue to provide fiat currency in response to demand.

“The Bank expects very soon to issue a Discussion Paper setting out its proposed regulatory regime for systemic retail payment systems using stablecoins. I am not able to set out the proposed regime in detail today,”

he said.

Moreover, the development model for the potential digital pound proposes that private entities play a crucial role in the CBDC’s creation. This approach stands in contrast to having government officials solely determine the roadmap, fostering greater involvement from stakeholders and encouraging a more decentralized process.

While the digital pound is in its infancy, it is seen as a possible competitor to private cryptocurrencies, particularly stablecoins. However, not all proponents support the idea of a Central Bank Digital Currency. 

The growing popularity of stablecoins has increased discussions on the necessity of global regulations to safeguard investors’ interests in the evolving landscape of cross-border payments and digital currencies.

The concerns raised by UK residents in the digital pound consultations align with similar apprehensions found in other jurisdictions worldwide. The European Union and the United States have grappled with comparable issues relating to privacy and control in the context of their respective digital currency plans. 

European privacy agencies, for example, have voiced reservations regarding certain provisions in the Digital Euro draft that could grant authorities extensive access to user data. 

Similarly, in the United States, the discussion around the creation of a CBDC has drawn criticisms from anti-CBDC advocates, who fear potential governmental intrusion and surveillance.