The IIF has responded to the Bank of England and HM Treasury’s consultation paper on a digital pound. We welcome the intensive and consultative work that has gone into the development of the Consultation Paper and the accompanying Bank Technology Working Paper. The IIF and its members have devoted effort to developing a substantive response to the Consultation Paper in view of London’s importance as a global financial center.

In its submission, the IIF notes that the value in a new payment system, such as the one under consideration in this Consultation Paper, is in the opportunity to create a multi-asset system that incorporates a range of digital currencies and tokenized assets, and, as such, feels the infrastructure supporting a CBDC should not be envisioned as entirely independent from such a multi-asset system.

We broadly welcome the forward movement of the UK authorities into Phase 2 but would also caution that there are a large number of important issues to be resolved in that phase, including some fundamental governance and financial stability questions that have yet to be answered completely by any jurisdiction to date.

The IIF wishes to call to the attention of the UK authorities some areas we think warrant further consideration in the Phase 2 process:

• We believe the proposed individual holding limits are too high and should not be transitional in nature, and we encourage the investigation of additional mitigants beyond limits on individual holdings, such as transaction limits. 
• We observe a number of key decisions seem to be made subject to the possibility of unilateral amendment by the Bank. We suggest a decision to remove or increase the limit beyond a routine adjustment for inflation would be significant enough to substantiate the agreement of HM Treasury. 
• We also observe further specificity on the privacy model is necessary, including to understand how the proposed limits on individual holdings may be enforced across multiple wallets. 
• We feel further work around the topic of legal liability is warranted to bring further clarity for instances of fraud in the digital pound system. 

Finally, the IIF stresses the importance of the UK authorities developing their thinking around a potential digital pound in close collaboration with the private sector.

This comment letter continues the close engagement of the IIF with central banks, regulators and global standard setting bodies on the development of CBDCs and other digital assets topics.