Bank of England expresses concerns about central bank digital currencies

It is impossible to predict the global impact of central bank digital currencies at this point, and the concept could pose unprecedented dangers.

Financial institutions have shown a keen interest in distributed ledger technology, and some countries have even taken steps to establish their own national digital currencies. However, the result of digitizing legal tender is also clear, and it is likely to bring a huge threat to the business model of commercial banks. The Bank of England is currently reconsidering their plans for blockchain technology. Because all risks must be carefully considered, especially the role of the central bank.

The Bank of England is not going to get too excited

In an era where financial reforms could determine the death and survival of many banks in the coming years, no one should take decisions lightly. Blockchain technology, which proposes a distributed ledger to decentralize many finance-related areas, is a powerful tool that can be used by all. But if the capabilities of this technology are not properly understood, there will be many doomsday scenarios.

The Bank of England is one of those financial institutions that is keeping a close eye on the advancement of distributed ledger technology. But at the same time, they are keeping their feet on the ground and not getting carried away by the concept of establishing a national digital currency.

Banks are using distributed ledger technology through private blockchains. Private blockchains are likely to lead to competitive threats from commercial and challenger banks. After all, the supply of funds and credit lines to other banks is also controlled by the central bank. At this time, it is still unclear what role distributed ledger technology will play, however, it may put competitors out of business completely.

Central bankers are having a hard time as they try to keep up with the evolution of finance. Bitcoin, fintech, mobile, and peer-to-peer solutions are all putting competitive pressure on the business models of the world’s central banks. Private blockchains will give central banks more power than ever before, as they will be the ones deciding who has access to their balance sheets and who does not.

Bitcoin, the most popular modern digital currency, shows how distributed ledger technology can build a financial ecosystem that everyone can participate in. In addition, everyone can see how Bitcoin is supplied - Bitcoin's supply is limited while fiat currencies are prone to inflation - and Bitcoin transactions are broadcast publicly in real time. Central banks will never adopt the same business model. Because they don't want other banks to know where their money comes from and where it goes.

Central bank digital currencies are dangerous

It’s impossible to predict the global impact of central bank digital currencies right now, and the concept could pose unprecedented risks. A lot depends on how these central bank digital currencies are designed and how they reach consumers and other banks. Will they replace existing banking institutions? Will they operate side by side? Or is there another strategy at work?

Assuming these digital currencies do emerge one day, they will be under the complete control of central banks. They can choose to make bank loans more expensive or less, and no one can influence them. In turn, this will have a huge impact on the global economy, which has been very unstable since the recent financial crisis. However, there is still an opportunity for central banks to use digital currencies in a positive way and reduce the demand for physical cash.

Original article: http://www.newsbtc.com/2016/03/02/bank-england-concerned-central-bank-bitcoin-clones/#userconsent#
By JP Buntinx
Compiled by: Kyle
Source (translation): Babbitt Information (http://www.8btc.com/bank-of-england-concern-bitcoin)