A 'Britcoin' would carry financial stability and security challenges and there's 'no convincing case' for one, says House of Lords report

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A digital pound for use by consumers poses security and financial stability risks and there's no need for the UK's central bank to introduce one, according to findings of a committee in the UK Parliament's House of Lords. 

A central bank digital currency, or CBDC, however, could be beneficial for use between financial institutions, said the Lords Economic Affairs Committee in a report published Thursday.  

The report from Parliament's unelected upper chamber comes as the Bank of England explores the possibility of launching a digital version of the UK's currency nicknamed «Britcoin». 

«The report concludes that there is no convincing case for why the UK needs a central bank digital currency (CBDC). The committee found that while a CBDC may provide some advantages, it could present significant challenges for financial stability and the protection of privacy,» the committee wrote in a report entitled, «Central bank digital currencies: a solution in search of a problem?» 

A CBDC is a digital banknote issued by a central bank directly to consumers and is backed by fiat reserves. 

The introduction of a digital pound would inevitably lead some people to transfer money out of their bank accounts and into CBDC wallets, the committee said. «Without safeguards, such as limits on the amount of CBDC individuals can hold, financial instability could be exacerbated during periods of economic stress as people seek to replace bank deposits with CBDC which may be perceived as safer,» it said. 

The Bank of England in November said commercial bank deposits could fall by 20% if plans for a digital pound are implemented.

The Lords' committee determined there are two main security risks posed by