A digital pound used by consumers could harm financial stability, raise the cost of credit and erode privacy, though a version for wholesale use in the financial sector demands greater appraisal, British lawmakers said on Thursday.

Britain’s central bank and finance ministry said in November they would hold a consultation this year on whether to move forward on a central bank digital currency (CBDC) that would be introduced after 2025 at the earliest.

Central banks across the world have stepped up work on CBDCs to avoid the private sector dominating digital payments as cash use falls. The prospect of widely-used cryptocurrencies issued by Big Tech has also galvanised such efforts.

But an e-pound used by households and business for everyday payments could see people move cash from commercial bank accounts to digital wallets, said the report by a committee in the House of Lords, parliament’s unelected upper chamber.

That could spark financial instability in times of economic stress and increase borrowing costs as a key source of lenders’ funding would dry up, it said. A digital pound could also harm privacy, the report added, by allowing the central bank to monitor spending.

“We were really concerned by a number of the risks that are posed by the introduction of a CBDC,” economic affairs committee chairman Michael Forsyth said.

Many benefits for the consumers could be “achieved by alternative means with fewer risks,” Forsyth said, pointing to regulation as a better tool to ward off the threat of crypto issued by Big Tech firms.

‘Far-reaching consequences’

However, a wholesale CBDC used to transfer large sums could make securities trading and settlement more efficient, the report said. Britain’s central bank and finance ministry should consult on its advantages over the expansion of the existing settlements system, it said.

Britain’s parliament should have the final say on any decision to launch a e-pound, the report said, calling for lawmakers to also vote on its governance.