Criticism of the Digital Pound

A former Bank of England economist, Neil Record, has openly expressed strong criticisms regarding the digital pound initiative, labeling it a “costly, useless project” that lacks customer demand. In an op-ed for The Telegraph, he argued that the movement towards a digital currency primarily aims to safeguard the central bank’s financial model rather than fulfill genuine public needs.

Concerns Raised

Record points out that none of the reasons cited by the Bank of England seem compelling enough to justify creating such a significant financial project. He emphasizes that the main worry is the decline in cash usage, which adversely affects the BoE’s revenue, stating that the interest lost from physical cash is the bank’s primary income source.

> “A world where cash becomes rarely used, and not widely held, would fundamentally damage the Bank of England’s economic model, and hence its existence in its current (independent) form.”
> — Neil Record

Record also notes that many British consumers already use secure digital payment methods through banks and mobile platforms. He argues that a government-backed digital currency, which would lack interest and be aimed at everyday transactions, would struggle to compete with these established services.

> “So a Central Bank offering that looks to the customer very like a current bank current account would struggle to be appealing. U.K. current accounts can, and often do today, offer interest on balances.”
> — Neil Record

Additionally, Record raises privacy concerns, suggesting that many consumers may distrust the BoE’s involvement in their financial activities. Despite the project investing over £24 million (more than $30 million) thus far, he believes that the digital pound has little customer appeal and recommends that the Bank of England concentrate on its primary responsibilities, such as managing inflation.

The Bank of England and HM Treasury began exploring the digital pound in 2021. Since then, the project has seen progress through consultations and discussions, but no final decision has been reached yet.

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Bank of England studies ZK-proofs to enhance user privacy for the digital pound.