LONDON, Jan 13 (Reuters) - 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. read more 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 galvanized 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 Bank of England 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 Chair Michael Forsyth told Reuters. ROLE OF PARLIAMENT The potential benefits of a CBDC - from tackling the decline to cash to supporting payments innovation - laid out by the Bank of England in 2020 were "overstated" or could be "achieved by alternative means with fewer risks," Forsyth said. He said, for instance, that regulation was a better tool to ward off the threat of cryptocurrencies issued by Big Tech firms. The Bank of England did not immediately respond to a request for comment. Still, 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, the report said. Britain"s parliament should have the final say on any decision to launch a e-pound, it said, calling for lawmakers to also vote on how such a currency would be governed. Forsyth said financial services minister John Glen had failed to give assurances that a CBDC "was not just something that the Bank of England and the Treasury would cook up and decide on the governance." A CBDC would have "far-reaching consequences for households, business and the monetary system," Forsyth said. "That needs to be approved by parliament." Responding to a request for comment on Forsyth"s comments, a spokesperson for the Treasury, which runs Britain"s financial and economic policy, said no decision had been made on whether to introduce a CBDC.