With all the chatter about blockchain technology, blockchain-based digital currencies and their potential impact on the mainstream financial system, perhaps it shouldn’t be so surprising that the Bank of England’s chief economist thinks those digital currencies could replace cash.
But the Bank of England isn’t ready to back that claim — at least not yet.
In a recent speech, Andrew Haldane, Chief Economist at the Bank of England, expressed how the U.K. government might look into issuing digital currency as a way to replace cash. But this came with one caveat: “The views are not necessarily those of the Bank of England or the Monetary Policy Committee.”
But Haldane has been quoted as showing some serious interest in the blockchain’s technology to overcome the central bank’s struggles to spur economic growth. That’s where creating and issuing a digital currency would come in to play.
At least for now, Bitcoin Magazine’s report says that Haldane has suggested that the government review other more technical ways to address the interest rate issues that are attached to traditional, physical currency. Having the U.K. government issue digital currency instead of paper could be one way to tackle this issue.
“This would preserve the social convention of a state-issued unit of account and medium of exchange, albeit with currency now held in digital rather than physical wallets,” Haldane said during the speech. “But it would allow negative interest rates to be levied on currency easily and speedily, so relaxing the ZLB constraint.”
Bitcoin, of course, has been the top digital currency that’s sparked the mainstream financial players to start talking more about the blockchain and digital currencies. Haldane also shares how the mindset shift about digital currencies could pave way for such an innovation.
This means developing central bank-issued digital currencies could soon become a larger priority on the central bank’s priority list.
“What I think is now reasonably clear is that the distributed payment technology embodied in bitcoin has real potential,” Haldane said. “On the face of it, it solves a deep problem in monetary economics: how to establish trust – the essence of money – in a distributed network. Bitcoin’s ‘blockchain’ technology appears to offer an imaginative solution to that distributed trust problem.”
Ironically, a report released about a year ago by the Bank of England showed that bitcoin could be a bank killer. Perhaps the tide has turned.
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