UK Digital Pound: have your say!
The government consultation is open till 7th June. Here's my response.
My opinion is that this government and Bank of England-controlled “digital pound” would be a recipe for tyranny. What’s your opinion? You still have a few days to let them know.
There are 12 questions in this UK government and Bank of England public consultation, and it’s definitely worth taking half an hour or an hour out of your time to respond, because money is pretty important to our way of life!
The consultation is available at this link, though the link takes you partway through the document, so you have to click the Back button a few times to get to the start.
It repeatedly conflates the centralised “digital pound” with digital bank accounts
The Consultation Paper is an easy read, even if you just skim through it as you’re answering the questions, and it’s quite revealing. What stood out for me was that it repeatedly conflates the centralised “digital pound” with digital bank accounts, aiming to give the impression that we’re already using these financial methods every day and we have been for years – this process just allows the government and Bank of England to manage the system, making it more trustworthy (“an anchor for confidence and safety in our monetary system” and free of risk from those pesky fraudsters.
What it would actually do is put all the control of our finances into the hands of the government and Bank of England at one central source. The way things are now, if you are Konstantin Kisin or Francis Foster of Triggernometry, and your business bank account is suddenly closed down without explanation, you can take your business to another bank. That’s what a free market in a free society is all about.
If there was only one centralised source for all your digital transactions, and the government decided to close your account, you’d be stuffed!
Oh, but that wouldn’t happen, the government would say. You can trust us! And anyway, we’re not making the digital pound the only form of money. (Not for now.)
The Consultation Paper also conflates digital money with digital transactions, in its discussions on privacy.
People often prefer not to have complete anonymity in digital transactions, because a paper trail acts as a contract, which is useful if you need to ask for a refund, or if there’s a dispute over whether the fee has been paid.
But having your personal details tied in to the currency source is an entirely different thing. Surrendering anonymity in this respect is effectively giving the government power over how much money you receive or can keep. In theory your bank could do this too, but there are certain government protections in place to insure against this, and this is also why people are generally advised not to put all their financial eggs in the one basket. With a “digital pound” there would effectively only be one basket - fine, as long as you trust the government to act honorably.
So here’s my response to the consultation. I’ve left out questions 1 to 7, as these refer to my personal details.
Q8. Do you have comments on how trends in payments may evolve and the opportunities and risks that they may entail?
Please see Section B of the Consultation Paper.
Money is a store of value, and in order to be seen as valuable, it has to be trusted – this is why words like "risk-free", "trust" and "stability" are used in Section B. Central bank digital money can be taxed at source, and that basic fact means that "risk-free", "trust" and "stability" do not apply to it. It may well be convenient, and for this reason it may appeal to some people. But with organisations like Triggernometry having their digital bank accounts frozen without a clear reason, increasing numbers of people are losing trust in centralised digital currencies.
Q9. Given our primary motivations, does our proposed design for the digital pound meet its objectives?
No. At a time when many people are losing or have lost trust in banks and government, introducing a digital currency that is controlled by the government's central bank is likely to drive many people to seek out alternative forms of currency and stores of value. Governments in the UK seem to be more answerable to the demands of corporate interests than their voters, many MPs don't even bother to reply to letters from their constituents, and the Bank of England was recently headed by a citizen of a foreign country, so I think there will be many people in the UK who will not trust the stated motivation of the digital pound as being "an anchor for confidence and safety in our monetary system".
Q10. Do you have comments on our proposition for the roles and responsibilities of private sector digital wallets as set out in the platform model? Do you agree that private sector digital wallet providers should not hold end users’ funds directly on their balance sheets?
I quoted from the Consultation Document here: “PIPs, and the wallets they provide, would never be in possession of end-users’ digital pound funds so do not pose counterparty or credit risk to their customers. Therefore, PIPs are unlikely to need extensive prudential regulation that is typical of some other types of financial institution."
Fine, unless Hitler or Stalin came to power. Unlikely you might say, but while this platform model might prevent outside fraud, the potential for abuse from those at the top who control the system is significant.
Q11. Do you agree that the Bank should not have access to users’ personal data, but instead see anonymised transaction data and aggregated system-wide data for the running of the core ledger?
Please see Section D.2 of the Consultation Paper.
This was a multiple choice, and I selected “Agree”.
Q12. What views do you have on a privacy-enhancing digital pound?
It would be a doorway to tyranny. Governments have shown again and again that they cannot be trusted and that they do not follow the will of the voters. Diagram D5 shows how privacy concerns might be eroded, with users being able to choose varying levels of identification. No doubt there would soon be some scare stories in the media about people who lost money via financial crime because they were unable to be identified by the authorities, and eventually online platforms would only be permitted to trade with ID-enabled accounts "for our own safety"...
Q13. What are your views on the provision and utility of tiered access to the digital pound that is linked to user identity information? Please see Section D.2 of the Consultation Paper.
See my answer to Q12.
This would be a way of nudging users to accept the Government and Bank of England having access to their ID info. The document says: "We therefore propose that the digital pound is at least as private as current forms of digital money" – in a competitive financial marketplace, this is a totally different matter. If a bank decides to freeze your assets, or to impose a levy on them, you can use an alternative bank. In a centralised system, that is not possible.
Q14. What views do you have on the embedding of privacy-enhancing techniques to give users more control of the level of privacy that they can ascribe to their personal transactions data?
The fact that this question has to be asked highlights the danger of a centralised digital currency. Cash is inherently private, as is any form of hard currency. The transactions you make with cash are not always private, for good reason, as you might deserve a refund or redress if the goods are faulty or if the service you have paid for is not carried out. Cryptocurrencies like Bitcoin are anonymised, but if you make anonymised transactions with them, you risk losing your money.
The fact that the digital pound would not be anonymous (p72 of the Consultation Paper) shows that this is a system that could lead to serious abuses of power, because the currency itself would not be separate from the transactions, and would instead be a centralised system that could literally control people's livelihoods. Comparing it to bank accounts (the Consultation Paper says "just like bank accounts") is very misleading, because unlike bank accounts, there would be no market choice involved. Each digital pound would be assigned to a particular user's ID – there might be anonymity to outside fraudsters, but there would be no anonymity to prevent theft from the inside (eg, freezing of accounts due to possible unclear breaches of convention).
Q15. Do you have comments on our proposal that in-store, online and person-to-person payments should be highest priority payments in scope? Are any other payments in scope which need further work?
Please see Section D.3 of the Consultation Paper.
This is an irrelevant question for me, because I would view such a currency as inherently flawed and certainly not worth exchanging my labour for.
Q16. What do you consider to be the appropriate level of limits on individual’s holdings in transition? Do you agree with our proposed limits within the £10,000-£20,000 range? Do you have views on the benefits and risks of a lower limit, such as £5,000?
Please see Section D.3 of the Consultation Paper.
This question is also irrelevant, because I would strongly advise against anyone investing in a currency whose existence is inextricably linked to a digital account that is subject to the whims of politicians.
Q17. Considering our proposal for limits on individual holdings, what views do you have on how corporates’ use of digital pounds should be managed in transition? Should all corporates be able to hold digital pounds, or should some corporates be restricted?
Please see Section D.3 and Box I of the Consultation Paper.
In a free country, corporates should be allowed to hold currency in whatever forms they like, as long as they are open and honest about it to their investors.
Q18. Which design choices should we consider in order to support financial inclusion?
Please see Box J of the Consultation Paper for further information.
Financial inclusion is best supported by cash and access to good jobs. The final paragraph of Box J suggests what the "digital pound" is really all about: if you're not willing to show your ID, you're only allowed "limited, low-value payments".
"Further design considerations for the digital pound could include the use of tiered wallets, explored above, which may offer an opportunity to tackle some of the financial inclusion issues driven by ID requirements. Using tiered wallets, users with limited forms of ID could open basic digital pound wallets allowing limited, low-value payments."
The "digital pound" is a means of public control and manipulation.
Q19. The Bank and HM Treasury will have due regard to the Public Sector Equality Duty, including considering the impact of proposals for the design of the digital pound on those who share protected characteristics, as provided by the Equality Act 2010.
Please indicate if you believe any of the proposals in this Consultation Paper are likely to impact persons who share such protected characteristics and, if so, please explain which groups of persons, what the impact on such groups might be and if you have any views on how impact could be mitigated.
I suspect that the State Pension and other benefits, including disability benefits, will be among the first payments to be supplied in the form of the "digital pound" if it comes into operation, so groups who rely on such benefits may find that they have their finances limited impacted if conditions are applied.
Note: the numbering of the questions was quite confusing, and Q9 on the Consultation Paper: “Do you have comments on our proposal that non-UK residents should have access to the digital pound, on the same basis as UK residents?” was not included in the online survey document. If you want to answer that question you can do so by post or email - details on p95 of the Consultation Paper.
It’s an interesting question. If non-UK residents were to have access to the UK “digital pound”, it could be seen as a global currency. If other countries introduced similar types of digital currency, things could head in the direction of a “world currency”, if people generally agreed to use it.
Links
Consultation Paper: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1134845/CBDC_WEB_PDF_-_7_FEB_2023_1130am.pdf
Consultation response link: https://app.keysurvey.co.uk/f/41651494/3010/
The response link is also on p95 of the Consultation Paper, and the consultation questions are listed on p94.