The technology behind Bitcoin, known as ‘Blockchain,’ is being viewed as revolutionary, and central banks around the world are devoting their resources to ‘digital cash’ which will change the very nature of money.
The concept of electronic money is nothing new, however possible digital currency would allow people to transfer money to one another without the need for a commercial bank. As such, consumers could have a “digital wallet” and transfer money in a secure way without commercial banks acting as the middleman – much like ordinary cash.
Ben Broadbent, Deputy Governor, Bank of England, commented:
“Prospectively, it offers an entirely new way of exchanging and holding assets, including money. It’s an irony, therefore, that some of the economic questions it raises have actually been around for a long time, for as long as economics itself.”
In a sense, a central bank currency in digital form already exists, as commercial banks can already hold accounts with ‘central bank reserves,’ in which when a customer withdraws cash, commercial banks must be able to provide real currency on request. Individuals, however, have so far been excluded from the ability to hold such a digital currency, but this could change thanks to Blockchain technology.
David Clarke, advocate for the idea of a central bank issued digital currency at Positive Money, said:
“We think the starting point is for the Bank of England to introduce a certain amount of digital cash. It could offset this over time by reducing the amount of bank-created money by raising reserve ratios. Under the system we propose, decisions about how much money is created – and when it is created – will be a matter for the monetary policy committee.”
Read the full article, via World Finance, here.