Association of Accounting Technician’s (AAT) response to the House of Lords Economic Affairs Committee inquiry into Central Bank Digital Currencies


The Committee will be aware that regulators have taken an increasingly tough stance on digital currencies.

In 2019, a report from the G7 on stablecoins[1] found that they pose a serious threat to a range of public policy areas, including “challenges to fair competition, financial stability, monetary policy and, in the extreme, the international monetary system”.


Earlier this year the FCA starkly warned that cryptocurrencies are such a high-risk investment that, if consumers invest in these types of product, they should be prepared to lose all their money[2].


Despite these blunt warnings, few consumers appear to be taking any notice. Research published by the Financial Conduct Authority (FCA) in June indicated that over 2 million adults in the UK own digital currencies, an increase of 400,000 on last year[3].


With regulatory warnings increasing in frequency, tone and severity, it seems rather contradictory that the Bank of England should continue to toy with the idea of introducing its own digital currency – a Central Bank Digital Currency (CBDC), especially when the Bank of England has mirrored FCA warnings that anyone buying crypto assets should be prepared to lose all their money. 


Nevertheless, as the Bank of England and HM Treasury have created a CBDC Taskforce to co-ordinate the exploration of a potential UK CBDC it is clear that such plans are now credible, realistic and increasingly likely.


The Bank has sought to differentiate its offer by stating that a CBDC would be fundamentally different to cryptocurrencies or crypto assets because cryptocurrencies like Bitcoin are privately issued rather than issued by a central bank. 1 CBDC would be worth £1, ensuring the intrinsic value of the currency in a way that private issuers cannot. It is unclear whether this distinction is sufficient to warrant the launch of a UK CBDC. It is also unclear whether the public understands or is any way influenced by such a distinction, the fact that 2 million adults in the UK already own digital currencies, suggests many are probably not.


However, if a CBDC were to be launched, it is likely that many more members of the public would utilise such an offer. This is because those who are concerned about the security of digital currencies are likely to be more relaxed about using a digital currency issued by a central bank, which would also be likely to avoid the energy usage concerns associated with Bitcoin and others whilst crucially providing the public with the confidence and stability associated with major central banks.


There are numerous potential benefits in having a CBDC;



On the specific issue of the future of notes and coins, as AAT stated in its 2018 response to the HM Treasury consultation on digital currencies;


In relation to 1p and 2p coins, the evidence referenced in the Call for Evidence appears substantial. Notably this includes, that the majority of 1p and 2p coins are used in a transaction only once before they leave the cash cycle, having been saved in jars or thrown away; that the Royal Mint need to produce and issue over 500 million 1p and 2p coins each year to replace those falling out of circulation; and that the cost of production is the same as for higher denomination coins, meaning it is costing more to make and distribute the coin that it is worth. These factors suggest there is a strong case for removing these coins from circulation.[7]


Despite the overwhelming evidence for reform, HM Treasury took no action, primarily for political reasons. As AAT noted in the same response;

“…sensationalist newspaper headlines during the week following the launch of this Call for Evidence appear to have hamstrung the Treasury from acting. The Daily Mail front page called it “a PR disaster in the making”, the front page of the Sun said, “Save our coppers,” and the Daily Mirror complained: “Pennies dropped.” Subsequent Downing Street responses appeared to suggest that there would be no change to the current denominational mix.


This example further reinforces the need to gather public, political and media support for the launch of a CBDC if it is to be successful.


Another major consideration is not just the potential for innovation and efficiency but the need to remain internationally competitive.


China has been developing its digital currency roadmap since 2014, putting it far ahead of other nations and its trialling of a CBDC is now well progressed with the People’s Bank of China recently confirming it as “technically ready” for cross border transactions[8].


In June, European Central Bank Governing Council member Francois Villeroy de Galhau publicly expressed his fear that China’s rapid progress in developing a digital yuan poses a key risk in preserving the euro’s international role[9]. Just a few weeks later, the European Central Bank launched a 24 month project to explore the establishment of a digital version of the Euro[10]


In addition to fears in Europe, China’s lead in this new world could potentially challenge the global dominance of the American dollar. That said, American regulators seem unconcerned about such threats with the Vice-Chair for Supervision at the Federal Reserve recently stating; “It seems unlikely, that the dollar's status as a global reserve currency, or the dollar's role as the dominant currency in international financial transactions, will be threatened by a foreign CBDC.[11]


Given the international direction of travel towards CBDCs and the rapidly growing use of private sector digital currencies in the UK, AAT certainly supports meaningful exploration of the advantages and disadvantages of establishing a CBDC. When considering the many negatives of existing digital currencies such as Bitcoin, AAT is inclined to agree with Bank of England Fintech Director, Tom Mutton, who recently stated, “…let’s not throw the blockchain baby out with the Bitcoin bathwater.[12]


Further information 


If you have any queries, require any further information, or would like to discuss any of the above points in more detail, please contact Phil Hall, AAT Head of Public Affairs & Public Policy: 


E-mail:  Telephone: 07392 310264  Twitter: @PhilHallAAT 




30 September 2021



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[1] Bank for International Settlements, Investigating the impact of global stablecoins, 18 October 2019:

[2] FCA warns consumers of the risks of investments advertising high returns based on cryptoassets, January 2021:

[3] FCA, June 2021:

[4] How many counterfeit banknotes are in circulation?, Bank of England:

[5] The Korea Herald, May 2021:

[6] Cross-Border Interbank payments and settlements, November 2018:

[7] AAT response to HM Treasury’s Call for Evidence: cash and digital payments in the new economy, May 2018:

[8] Progress of Research & Development of E-CNY in China, July 2021:

[9]China’s Digital Yuan Is Key Risk for Euro, ECB’s Villeroy Says, Blomberg, 29 June 2021:

[10] Global Government Fintech, July 2021:

[11] Parachute Pants and Central Bank Money, 28 June 2021:

[12] Bank of England, June 2021: