Written evidence submitted by The Centre for Digital Assets and Democracy (DCG0038)

The House of Commons Science, Innovation and Technology select committee Inquiry: digital centre of government

A.               EXECUTIVE SUMMARY

When elected bodies ask about public services, the starting point must be what about the public itself? What does the public want and what they do not want?

It is highly likely that the majority of the public voted for the money they pay over in taxes to be used wisely and or for their private information to remain private.

A.1               Efficient technology

The solution to the first point it is for the public sector to buy proven solutions from the private sector which developed and tested them. I am writing this on a laptop that I bought at a negotiated price on the open market. It would have made no sense for me to try and build it from scratch when a fitting off-the-shelf solution that allowed me to begin work quickly was available.

A.2               Privacy

As for the second, developments in blockchain technology have created systems which provide greater data security than ever seen before. Blockchain allows for the creation of digital logs, or accounts, which are immutable.

B               TERMS OF REFERENCE

B.1               Blockchain technology

(ToR: What infrastructure … is required to make the government “more digital”?)

The technology behind blockchain is made up of a network of computers, each of which securely hold copies of information. This removes the “one point of failure” issue which is inherent when a centralized authority holds all records. With blockchain, an attacker needs to attack every computer which holds information at the same time and in the same way.

So while we have to accept that no system is ever 100% safe from bad actors, the nature of blockchain means that it offers users more control over personal data and greater security while at the same time allowing systems to scale up at speed.

Taking these points together, we see how existing blockchain solutions (and those in development) provide increased security and utility in areas of sensitivity.

B.2               Data security

(ToR: Are the technological solutions required for the digital centre already used by government and other public bodies?)

People are generally sensitive about their financial situation. Generally we do not talk about our finances – benefits and woes – even to our closest friends. It is a very private area of life and financial privacy is one component of the financial freedom that is key to democracy.

The issue of data security and lawful privacy are at the heart of blockchain use in finance and already being used in the private sector.

B.3               The government in blockchain and finance

(ToR: What technical and policy expertise does DSIT need to deliver the digital centre?)

This sensitivity and its importance to the public is one reason why we submit our view that taxpayer money should not be spend on central bank digital currencies (CBDC). There are arguments that CBDCs can give individuals and businesses faster and more efficient payments at lower costs, using a more secure and reliable payment infrastructure which will reduce the risk of fraud and other financial crimes. While this may be correct, it does not consider time and cost, including Parliamentary time to amend the Bank of England’s constitution or the potential infringement on human rights.

It is interesting to note that one of the first countries to decide that this investment in time and money was China. To quote the Human Rights Foundation,[1] “CBDCs are increasingly associated with significant human rights and civil liberties concerns”.

An alternative system is available that has been created by technical and policy expertise upon which the government can draw: stablecoins. The private sector has industry and think tank professionals who can help create a UK digital centre designed and built for enterprise. In turn the systems they create can be adopted in a range of governmental areas that do not require legislative changes and are no doubt the subject of other submissions.

B.4               The value of governmental support of blockchain and financial privacy

(ToRs: What benefits will a digital centre deliver to the UK economy?; and What lessons do previous and contemporary digital transformation initiatives offer for the digital centre?)

The current financial system is dominated by banks and payment system providers who charge fees for every transaction. This can cut into both individuals and businesses getting value for money in their spending.

As with the reasons given for introducing CBDCs, using stablecoins as an alternative in these transactions can provide faster and more efficient payments at lower costs, using a more secure and reliable payment infrastructure which will reduce the risk of fraud and other financial crimes, and do so in a way which will not cost taxpayer money or great legislative reform.

Stablecoins can often reduce transaction costs to close to zero and speed up payments. For businesses, this reduction in transaction costs can have a significant effect on profits. Likewise, fast settlement means greater cashflow and the reduction of risk that a payment may fail.

B.6               Action taken by other governments

(ToR: What can the UK learn from other countries’ efforts?)

Already in the US we have seen stablecoins become the cheapest way to send dollars and the US administration has made the introduction of new stablecoin regulations one of its priorities. On 13 March 13 2025 the US Senate Banking Committee passed the Guiding and Establishing National Innovation for US Stablecoins Act of 2025 to establish a comprehensive regulatory framework for the issuance and regulation of payment stablecoins in the US.

B.7               The right regulation

(ToR: What … regulation is required to make the government “more digital”?)

The UK government is well-placed to learn from existing EU[2] and planned US legislation as it develops its own stablecoin regime.[3] This has been addressed by the government.[4]

The current timetable for the introduction of stablecoin regulation has been set out by the Financial Conduct Authority and the consultation paper is due in the first half of 2025. This gives government and industry the chance to create a regulatory regime which is right but light and therefore aids innovation, profitability, job creation to make the UK a digital centre that attracts global talent and investment.

RECOMMENDATIONS

We recommend that to meet and build on the ToRs referred to above, the Select Committee works to accelerate the introduction of stablecoins making use of current legislation and common law to make the UK a globally leading digital centre for trade and commerce.[5]

ACKNOWLEDGMENTS

This response has been prepared by the Centre for Digital Assets and Democracy.

21 March 2025