UPDATE: We’ve published a pioneering new report with the New Economics Foundation outlining the privacy concerns associated with CBDCs.
The report explores privacy risks posed by CBDCs, the challenges involved in building a privacy-preserving CBDC and concerns around the formation of a cashless society.
No one has made the case for why the UK needs a “digital pound” - but it would come at a major cost to our privacy, financial freedom and equality. The risks are huge. In a worst case scenario, a CBDC could create a vast new web of financial surveillance and control.
The proposal would:
Take action now, or read our 7 key reasons to oppose the Government’s plans for a UK CBDC.
Our groundbreaking new report, "Big Bank is Watching You: Preserving Privacy Amid the Rise of CBDCs” explores the privacy risks associated with CBDCs and the challenges involved in building a privacy-preserving CBDC.
The Government has yet to make the case for a UK CBDC. We insist that the Government recognises an array of serious civil liberties concerns. The key report recommendations are:
The Government should not introduce a CBDC unless a compelling case is made for why one is needed.
Any UK CBDC should retain the anonymous nature of cash by adopting an e-cash design.
The Bank of England must ensure that CBDC design does not infer a certain monetary policy stance.
Prohibition of programmable money without user consent should be embedded in the design of any UK CBDC.
A UK CBDC should be exempt from paying interest by design.
Make sure you personalise your email with your name, postcode, and your own reasoned arguments and feelings about a UK Central Bank Digital Currency
If you're not sure who your MP is, you can find out here.
A centralised bank digital currency (or CBDC) is a “new form of digital money” issued by a central bank instead of a commercial bank. In this case, it is the Bank of England rather than banks such as Lloyds, Halifax, or Barclays. Unlike conventional currency which can be withdrawn as physical notes and coins, a CBDC would only be displayed and accessed digitally, through a computer, phone or other device.
As they are mediated by state-owned banks, CBDC payments allow the government oversight of the public’s financial activities. This is unlike cryptocurrencies such as Bitcoin, which are a form of digital currency that can be traded and exchanged without a third-party go-between. CBDCs are becoming increasingly popular: over 90 central banks are currently either researching, developing or piloting them. However, the rush to issue a new digital pound threatens the public’s privacy.
Widespread adoption of any centralised digital currency will drastically change how much data is generated by everyday transactions, and therefore how much of the public’s identity, income and transaction information the state has access to; provoking serious risks of state surveillance.
A UK CBDC would have a major impact on this country.
There is insufficient evidence to support such a significant change that would transform the financial landscape, endanger privacy and a range of human rights, create security risks, and could irreversibly redefine the relationship between citizen and state. Parliament’s Economic Affairs Committee described the UK CBDC proposal as a “solution in search of a problem”.
Generalised surveillance of CBDC transactions would be inevitable given the context of the current legal landscape, particularly counter-terror law, anti-money laundering law and investigatory powers law.
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Every transaction would be recordable and anyone with access to the core ledger – be it a public authority or hacker – could potentially see these transactions. The Government has committed to introducing legislation to guarantee user privacy (however, there's no detail on what these protections are, so we don't know how good they'll be).
The potential to program the public’s personal finances or welfare payments could lead to financial control, an invasion of privacy, potentially a breach of the right to protection of property and, depending on the limitations set, could pose a serious threat to a range of other fundamental rights – from freedom of expression, to freedom of assembly and protection from discrimination.
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Whilst the Bank and Government have promised legislation guaranteeing they would not program users' digital pounds - a future government could. In recent years, money has become a target for private and state actors around the world attempting to shut-down and digitally debank campaigners and silence voices.
For example, the Canadian Government used emergency powers to freeze the bank accounts of suspected protesters against vaccine mandates. More recently, PayPal cancelled the account of a UK journalist and free speech campaigners. Despite the risks, the consultation document praises the “potential benefits of programmability for innovation”.
It is nigh on impossible to issue a UK CBDC without a comprehensive digital identity system. Combining digital identity and CBDCs poses a serious risk of surveillance, security breaches, hacking/identity theft, and discrimination.
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Everyone should have the right to access the economy with or without digital currency, and with or without digital ID. The consultation document proposes “tiered wallets” where “users with limited forms of ID could open basic digital pound wallets allowing limited, low-value payments”.
Creating tiered levels of access to money in exchange for increasing amounts of identification amounts to a discriminatory, identity paywall that would most affect migrants, ethnic minorities, older people, and poorer people, who are least likely to hold advanced forms of ID. The Government has said it would not be responsible for verifying users’ identity but there are still questions over data access.
The consultation points out that providers can use personal data to “develop marketing activities” and “tailor products and services”.
Exploiting personal data in this way would endorse mass surveillance and exploitation of the public’s sensitive personal data, further shrinking the private sphere in a growing digital panopticon.
A centralised CBDC system would create a huge platform of population data and, as such, become a “critical piece of national infrastructure”. This would provide hostile state and non-state actors with a large target to focus cyberattacks on.
Combining digital identity and CBDC poses a serious risk of security breaches and hacking/identity theft and a successful breach could put the entire public at risk.
The decision to develop a UK CBDC should not be made by the Bank of England and HM Treasury alone – yet the pilot planned for 2025 seems to minimise parliamentary involvement.
The Government has now committed to introducing primary legislation with a vote in both Houses of Parliament before launching a digital pound.
October 13, 2024
