According to the governor of BoE, Mark Carney “fundamental problems lie with the “idea of a digital currency issued by a central bank” for public use.
Some economists have predicted that in the future, crypto-currencies like bitcoin could be in use “across entire economies” once central banks start creating them. However, Carney sees more scope for improvement in the blockchain technology especially in “the way transactions are conducted between financial institutions”.
Furthermore, he clarified that rolling out “such an approach” into the entire country result in “financial stability risks”. In the present system central banks are already using “electronic money”, whereas only “a small proportion of their assets are now backed by gold”, while the exchange takes place in “a centralised fashion”.
With cryptocurrencies coming into play parties can directly make payments whereby eliminating the need of any “central intermediary” as the “shared ledger” of blockchain technology “verifies, records and settles transactions in a matter of minutes”. As a result, consumers with “central bank-issued cryptocurrency” can open bank accounts in any bank.
While, Carney added:
“You (could) create a situation where you can have an instantaneous (bank) run. So as soon as there were any concern, people can switch in their account at the Bank of England”.
This way, the BoE could land up with huge deposit volumes requiring the need to be invested into “different assets”. Carney continued:
“There are many talents of the Bank of England, but I think credit allocation across the entire economy would not be a good idea. So there are some fundamental problems if you push the retail design all the way down, unless you restrict the amount that people have.”
According to the September statement of the “Bank for International Settlements”, it found the time to be still early for taking any decision on starting the cryptocurrency issuance of central banks. Reuter further reported:
“It (Bank for International Settlements) concluded that the peer-to-peer nature of the technology meant that a cryptocurrency for consumers could enable the anonymity that cash currently provides. But if that were not considered important, it said, it was unclear what further benefits it could provide”.
In Carney’s words:
“At present, we don’t view it as a financial stability issue.”
While referring to the “combined value of bitcoin and other cryptocurrencies” being nearly “half the market capitalisation of Apple Inc”, he added:
“So it’s significant ... but it’s more like an equity-type risk that’s spread fairly widely around the world.”
References:
reuters.com
Some economists have predicted that in the future, crypto-currencies like bitcoin could be in use “across entire economies” once central banks start creating them. However, Carney sees more scope for improvement in the blockchain technology especially in “the way transactions are conducted between financial institutions”.
Furthermore, he clarified that rolling out “such an approach” into the entire country result in “financial stability risks”. In the present system central banks are already using “electronic money”, whereas only “a small proportion of their assets are now backed by gold”, while the exchange takes place in “a centralised fashion”.
With cryptocurrencies coming into play parties can directly make payments whereby eliminating the need of any “central intermediary” as the “shared ledger” of blockchain technology “verifies, records and settles transactions in a matter of minutes”. As a result, consumers with “central bank-issued cryptocurrency” can open bank accounts in any bank.
While, Carney added:
“You (could) create a situation where you can have an instantaneous (bank) run. So as soon as there were any concern, people can switch in their account at the Bank of England”.
This way, the BoE could land up with huge deposit volumes requiring the need to be invested into “different assets”. Carney continued:
“There are many talents of the Bank of England, but I think credit allocation across the entire economy would not be a good idea. So there are some fundamental problems if you push the retail design all the way down, unless you restrict the amount that people have.”
According to the September statement of the “Bank for International Settlements”, it found the time to be still early for taking any decision on starting the cryptocurrency issuance of central banks. Reuter further reported:
“It (Bank for International Settlements) concluded that the peer-to-peer nature of the technology meant that a cryptocurrency for consumers could enable the anonymity that cash currently provides. But if that were not considered important, it said, it was unclear what further benefits it could provide”.
In Carney’s words:
“At present, we don’t view it as a financial stability issue.”
While referring to the “combined value of bitcoin and other cryptocurrencies” being nearly “half the market capitalisation of Apple Inc”, he added:
“So it’s significant ... but it’s more like an equity-type risk that’s spread fairly widely around the world.”
References:
reuters.com
