The Bank of England Could Implement an Official Cryptocurrency in 2018
2017 is the year of the cryptocurrency. What may have started off as a novelty turned into a financial movement that captured the world's attention. Digital currencies were a hot topic and became a major investment tool.
Cryptocurrency superstar, Bitcoin, rose to unimaginable heights, causing an investment frenzy across seasoned investors, governments, and millennials. This is even more apparent with the Bank of England's recent effort to create their own Bitcoin-like currency.
As 2018 approaches the question across the world is, what role will cryptocurrencies play in the financial system? While some still haven't jumped on the cryptocurrency train, others have a more positive outlook on digital currencies. In an interview with Xinhuanet, Yahoo co-founder Jerry Yang believes cryptocurrencies will shape our future.
In the interview, he states “Bitcoin as a digital currency is not quite there yet. People are not using it to transact. People are using it as an investable asset. I personally am a believer in where digital currency can play a role in our society. Especially in, not only the front end of doing transactions but also in the back end of creating a much more efficient system and a much more verifiable system”.
The U.K.'s move to invest so much time and resources into their own digital currency signals a coming shift in the financial world.
The U.K. Bitcoin
Linked to sterling, the Bank of England is working hard to put into place their own cryptocurrency. With aims to have it up in running as early as 2018, some are indicating the cryptocurrency will rewrite the Britain banking industry. The U.K. created cryptocurrency will allow citizens to use the Bank of England to keep their money in digital form rather going to a traditional bank. By doing, it would allow U.K. citizens to complete major transactions in a matter of seconds.
The use of cryptocurrencies means no need of a central intermediary to allow transactions and track transactions. Using the blockchain technology that facilitates the digital currencies, transactions are processed directly because of the shared ledger that verifies, records and settles transactions in a matter of minutes. The implementation of a cryptocurrency would give consumers the opportunity to open accounts at any bank.
Though Mark Carney, the Governor of the Bank of England is excited about the new currency, he does have a lot of major concerns, most importantly, financial stability. He states “There are many talents of the Bank of England, but I think credit allocation across the entire economy would not be a good idea,” he said. “So there are some fundamental problems if you push the retail design all the way down, unless you restrict the amount that people have.”
One of the most obvious concerns is the potential for a run on a bank. If there were a run on a bank, triggered by some economic event, what is stopping people from going in and immediately just switching an to another account? While fail-safes are in place to prevent economic damage due to bank runs, blockchain technology could allow customers to circumvent those fail-safes and could cause bigger problems down the line.