The Bank of England, in its latest “One Bank” research, has pointed towards digital currency as a “potential channel” to address the financial and economic instabilities that cripple the global financial system today.
The central bank noted that,
“Digital currencies, potentially combined with mobile technology, may reshape the mechanisms for making secure payments, allowing transactions to be made directly between participants.”
While raising the systemic issue of launching its own digital currency, the Bank also linked the Bitcoin revolution to the Internet revolution that continues to transform our lives even today. It ascertained that,
“creating such a system would entail creating a protocol for value transfer over the internet, akin to what Berners-Lee (1989) did for information.”
Acknowledging that introduction of the peer-to-peer network may reform the way individuals use their traditional banks and insurers, the Bank did not hesitate to rule out the consequential negative impacts on the traditional banking network, and the existing payment systems.
The digital currency landscape has been gaining strong traction from governments around the world as they up the ante to fight the sticky deflation. The Ecuadorian government has already introduced its own digital currency, and the newly elected Greek finance minister Yanis Varoufakis recently voiced his opinion that the technology behind Bitcoin could be effectively used to fight deflation in the Eurozone.
The European Central Bank, in conjunction with the Bank of England, has also described the digital currency as potentially transformative in the payments arena.
Successful and widespread acceptance can also boost Bitcoin mining which has seen a decline post the 80% drop in the price. With mining expected to get more complicated, and with a limited number to meet the renewed demand, the economics may well play out in favor of central banks who are struggling to prop up inflation levels.
Bitcoin markets cheered the positive outlook as the value of Bitcoin shot up above the $275-mark.
