The remarkable rise in the value of bitcoin has resulted in considering the potential for a digital currency linked to national central banks.
The Bank of England’s research unit is looking at the possibility of introducing a cryptocurrency linked to pounds sterling.
The banking industry in Britain may transform this year as the Bank of England may issue a new crypto-currency as early as 2018. In February 2015, the Bank of England instituted a research unit to study the cryptocurrency market and blockchain technology. As such with the findings of the research unit, BoE is investigating the introduction of a cryptocurrency linked to Pounds Sterling. According to a report by Telegraph, the research team is expected to report back within the next 12 months.
If approved, the new sterling linked cryptocurrency would allow British users to keep their digital money with the central bank itself, rather than going via a retail bank. Moreover, this would also enable large transactions to be carried out almost instantly.
The remarkable rise in the value of bitcoin has resulted in considering the potential for a digital currency linked to national central banks. In December, Mark Carney, the Governor of the Bank of England told a Treasury Select Committee that BoE undertook a successful test on blockchain technology last summer and that he had held talks with other central banks about launching the virtual currency.
"The underlying technology [blockchain] is actually of a fair bit of interest. We are working with it at the Bank of England," said Carney.
Earlier in November, Dr. Carney claimed that the rapid increase in Bitcoin's value would not pose a threat to global financial stability.
Moreover, Carneys further stated that blockchain technology could be used for settlements between central banks which would be the "most interesting application," benefitting the financial stability and efficiency.
Simon Scorer, a researcher at BoE, reportedly in September 2017 publicly talked about the design requirements for a central bank-issued digital currency. He said it would need "extraordinary levels of resilience" against a range of problems. "Like current financial infrastructure, a widely used [central bank digital currency] would likely be considered critical national infrastructure. ... It would need to be operational across the country, 24 hours a day, 365 days a year," he said.
The blockchain technology is something that the governments can't ignore and as such many countries are researching the possibility for a national cryptocurrency.
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