House of Lords Committee Inquiry in Regards to the Call for Evidence on Central Bank Digital Currencies (CBDCs) (Nov 2021
Regulatory Engagement & Advocacy
  • CryptoUK
  • 23 November, 2021

CryptoUK (CUK) and its members welcome the opportunity to input to the committee’s
inquiry in regards to the call for evidence on Central Bank Digital Currencies (CBDCs)

CUK is the United Kingdom’s (UK) trade body for the cryptoasset industry. We believe in the
transformative potential of digital and cryptoassets and the underlying blockchain
technology. We promote accountable self-governance whilst advocating for fit-for-purpose
legislation and regulatory frameworks for crypto and digital assets in the UK. We achieve
our vision by establishing and fostering productive partnerships between digital and
cryptoasset industry participants with legislatures, policymakers, and regulatory agencies to
educate and nurture an environment that fosters innovation, job creation and investment.
As an introduction we are aware CBDC’s are a hot topic at present, the majority of the
community consider CBDC separate to the standard cryptoasset taxonomy as described by
the UK government in the joint Crypto Assets Task Force, which was established in 2018.
The industry wholly agrees with the current taxonomy of payment or exchange tokens, utility
tokens or security tokens.
However, in recent years we have seen the rapid growth of private stablecoins. This has
subsequently focussed governments and central banks to consider public stablecoins or
what is commonly referred to as CBDC’s. We do not see CBDC’s as a cryptoasset as
described above. Stablecoins are a new fourth separate class. In March 2020 HM Treasury
closed their consultation on the UK’s regulatory approach to cryptoassets and stablecoins.
This consultation proposes a separate regulatory regime for private stablecoins similar to
electronic money. We are largely in agreement to this. Please see our public consultation
response here.
Rather than answer each of the questions posed individually for the purpose of this call for
evidence, I will draw the committee’s attention to the main issues as CUK sees it. I also
reference our response to the Bank of England (BOE) discussion paper Central Bank Digital
Currency: Opportunities, challenges and design (June 2020).

The following are some short views from our community. I suggest the committee actively
engages with the “Digital Pound Foundation” of who we know actively engage in good work
both in terms of thought leadership and also practical solutions to a UK based CBDC.
Furthermore, we are aware of a number of market participants that are involved in the
BOE’s CBDC Engagement and Technology groups. We question the overall effectiveness of
this forum. We understand that there is a lack of diversity of viewpoints or representation
from non-traditional sectors of the industry. In particular the engagement group, where
many of the participants are high-level (C-suite) staff from traditional institutions. Therefore,
we feel it would be interesting to see what they can meaningfully contribute in practice. A
C-suite executive from a bank is not the same as CEO of a fintech or start up in the
blockchain arena as they are a lot further from the “coalface” and there is a danger that this
will just turn into a lobbying group.

Design Features
– Token based versus account based
– Token based blockchain solutions are most successful when there is a
greater requirement for full decentralisation. As this will not and should be the
case with a Fiat CBDC we feel an account based option best suits a CBDC.
Alternatively, we suggest a token based system that does not live on a
blockchain or distributed ledger (see link to SNB research paper detailed

– Retail versus wholesale
– Here we pose a very important question in respect of disintermediation within
the retail sector. Would I prefer a risk free loan to the central bank than a
deposit at Northern Rock? Yes of course I would. Every bank has an element
of credit risk whereas the lender of last resort does not.
– However, fractional banking allows for economic growth through loans to
individuals and corporations.
– Wholesale designs are very intriguing and wide reaching.
– Monetary policy mechanisms can be improved in terms the speed to
react to macro economic events.
– Central banking cross border operations. During the credit crunch the
London markets were unable to fund in USD. There were large
consequences to many market participants to this shortage of USD

– Programmable money
– We feel that the consensus is that there is no debate that is a major benefit or
a design benefit of CBDC.
– Government financial support programs can be delivered in real time to the
correct wallet.

– Taxation collection.
– Smart contracts can self execute removing human intervention (overheads
reduced and human error removed.

– Privacy is a major concern. Financial freedoms and a certain degree of anonymity is
paramount to any democracy. We point to China’s progessive development of a
CBDC. We understand this motivation is born out of increased state control
(monitoring / capital controls) and not of improving payments systems, financial
freedoms or delivery of governments for eg.
– New forms of digital payments are paramount to the success of UK Plc. However, we
must tread carefully and ensure a balanced approach is taken. I refer to a research
paper out of the Swiss National Bank (SNB) which proposes a solution with privacy
preserving features embedded within “blind signature” cryptography.
We would be delighted to answer any further questions the committee may have on CBDCs
or the wider crypto and digital asset industry and to assist the committee in its inquiry.