The government is set to reveal its regulatory package for crypto in the coming weeks.
"While a CBDC may provide some advantages, it could present significant challenges for financial stability and the protection of privacy," the committee said.
The deadline for responses on a possible U.K. central bank digital currency is mid-October.
The U.K. Parliament has been presented demos of real-world blockchain applications designed to educate policymakers.
A UK parliamentary hearing on blockchain and cryptocurrencies took on a largely negative tone with one panelist dismissing the technology as a fad.
The U.K. government does plan to regulate exchanges and wallet providers, but won't intervene to help such startups get bank accounts.
The U.K.'s House of Lords has released a report highlighting the opportunities for distributed ledger technologies across government services.
A committee of the House of Lords struck a curious but at times critical note when discussing blockchain and its impact on finance and government.