Avoiding Brexit, Bank of England Governor Carney wants to talk about blockchain

Bank of England Governor Mark Carney is set to give a major speech on the technology behind cryptocurrencies, Bloomberg reports.

Recently, the UK has been hovering on the edge of Brexit, but Carney, the governor of the central bank, does not want to talk about this topic. This Thursday, Governor Carney will attend the London Financial Community Conference and talk about the technology behind cryptocurrencies. Two weeks ago, Federal Reserve Chairman Yellen also discussed this topic. This time, Carney chose to emphasize how the central bank embraces this innovation, which will have a significant impact on the UK's finance.

Carney's thoughts on digital currencies will be the Bank of England's highest opinion on the topic. He told MPs last month that the speech will focus on the development of financial technology (fintech), what it means for the structure of the financial system, and what officials need to do. The governor, who has previously expressed his willingness to go beyond the boundaries of conventional central banks, is now entering an area that will have an impact on payments, cybersecurity policy and monetary policy.

“Central banks adopting crypto versions of fiat currencies would be a game changer,” said Daniel Marovitz, president of Earthport Plc, a London-based cross-border payments company. “It would demonstrate that the technology can work in the real world, not just in a lab.”

Sharing Platform

As the Bank of England increases its research into the technology, the Bank of England’s big thinker, Chief Economist Andy Haldane, has expressed the importance of the development of digital currencies. Still, Marovitz’s “game changer” theory is still some way off. Ben Broadbent, deputy governor of the Bank of England, said in March that the central bank still has a lot to think about.

Internationally, major central banks have also been debating this topic. The Bank of England has been studying how blockchain can be used for payments or issuing pounds. The People's Bank of China and the Dutch Central Bank are also pursuing their own blockchain plans. In February, Barbados even issued a "digital Barbados dollar" on the blockchain.

A more convenient currency

Blockchain technology enables senders to send assets as easily as sending an email, without the need for third-party verification. This technological breakthrough could make intermediaries, such as clearing houses that record securities transactions, meaningless, a development that could significantly reduce the cost and time required for transactions.

This technology can also thwart hackers because blockchain ledgers are not centralized and have no central hub. For example, Bitcoin's blockchain has existed for seven years and has never been down.

Yellen this month spoke about the technology's potential to bolster cybersecurity, which has gained more attention from central banks and investors after hackers stole $81 million from Bangladesh's central bank following the Swift hack.

The benefits of this technology for central banks don’t end there.

“What banks seem to be interested in is figuring out, at least in theory, whether it’s possible to have a digital currency that’s controlled by the central bank,” said Peter Dixon, an economist at Commerzbank in London. “What central banks are worried about is that technically, or at least in theory, they could lose control of the money creation process.”

In a speech in February, Bank of England deputy governor Ben Broadbent suggested that households could potentially hold their current central bank accounts directly through blockchain technology.

However, such a development will also have a significant impact on commercial banks.

“We’ve had a digital revolution that’s changing the way transactions are processed in financial services,” Dixon said. “That’s going to have an impact on how the Bank of England operates.”