“We have yet to hear a convincing case for why the UK needs a retail Central Bank Digital Currency.” This was the definitive conclusion of the House of Lords Economic Affairs Committee’s report into the proposed Government Central Bank cryptocurrency project published last week following a four-month inquiry.

As pollsters who have tracked global public sentiment on cryptocurrencies and Central Bank Digital Currencies (CBDCs) in particular, we could not agree more with this conclusion. The Government has a unique chance to position the UK as a world leader in responsible crypto usage; a CBDC will not do that.

Substantial public support is a requirement for the success of a “retail” CBDC intended to be used by citizens for everyday transactions. Yet, as we reported to the Committee’s inquiry, such public support is profoundly absent — and there are significant reasons to doubt whether it will ever emerge. The Treasury and the Bank of England should not mistake the growing enthusiasm for cryptocurrency use in the UK as support for a Central Bank Digital Currency. 

If created, a UK Central Bank Digital Currency would dramatically change the Bank of England’s involvement in the everyday use of British money and potentially bring it into a head-on collision with controversial debates around citizens’ privacy. 

Privacy is a major source of apprehension for the public when it comes to the potential introduction of a CBDC. As many as a third of Britons think the Bank of England would issue a CBDC mainly to monitor how they use their money, while a quarter suspect the Bank’s intention is to limit what they could do with their money. 

And even supposing the Bank of England could guarantee against State intrusions into citizens’ privacy and use of money, a centralised CBDC ledger could still prove susceptible to hacks and cyberattacks—a risk that the public readily intuits. The Bank of England would need to constantly maintain the highest possible level of advanced technology to protect this new critical infrastructure from hostile actors and systemic failure. 

However, there is deep public scepticism regarding the Government’s ability to develop innovative proprietary software at scale. The public does not believe that the Government is capable of and can be trusted to develop new apps and other tech products quickly and effectively. Only 7% say they trust the Government more than private actors to be a source of innovation.

The greatest risk, therefore, is for the UK Government to devote significant attention and expenditure to develop a product that, by the time it is finally ready for public use, will have been outpaced by private sector innovation and rendered obsolete. 

A CBDC needs a public that believes and trusts in it in order to work. As our polling shows, the British public does neither. Why, then, is the UK pursuing a CBDC? The Treasury and the Bank of England’s motive for pursuing this project increasingly seems to stem from the mere fact that other countries, such as China, are exploring CBDCs. In other words, Fear of Missing Out. 

Is this behaviour what the public should come to expect from its Government in post-Brexit Britain—to be a follower, not a leader? The Treasury and the Bank of England should now start to look at other options that seek to harness the power of the multi trillion-dollar cryptocurrency sector rather than seek to control and stifle it. 

With its reacquired ability to shape its own financial regulatory environment, the United Kingdom has the enviable freedom to stake an independent position in the field of cryptocurrency governance. In comparison to the potential development of a CBDC, which garners ambiguous support, legislation that would provide a legal framework for cryptocurrency use in the UK sees support that outnumbers opposition 5 to 1. In such a more favourable legal and regulatory environment, the Bank of England could and should maintain oversight of the ledgers of private stablecoin issuers, guaranteeing financial standards and helping to position the UK at the centre of the new emerging Web 3.0. 

Louisa Idel is Head of Insights at Redfield & Wilton Strategies