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The Bitcoin Currency Bandwagon: Bank of England Might Join In by Launching Its Own Cryptocurrency in 2018 The Bitcoin Currency Bandwagon: Bank of England Might Join In by Launching Its Own Cryptocurrency in 2018

The Bitcoin Currency Bandwagon: Bank of England Might Join In by Launching Its Own Cryptocurrency in 2018

Cryptocurrency craze has made its presence felt in less than a decade.

News Updated 23rd January, 2018 by Stacy Clark

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The three-hundred year old legacy bank for Britons, Bank of England (BoE), is planning to launch its own digital currency linked to the Sterling, this year. A research body has been instituted to look into the possibility of cryptocurrency along the lines of Venezuela’s Petro and Russia’s CryptoRouble. In fact, the bank did a trial run of the bitcoin currency in spring of 2017, and it was successful.

BoE plans to launch its own bitcoin-style cryptocurrency in 2018 for making financial transactions safer, cheaper and more efficient

A central bank-backed, Bitcoin-style cryptocurrency means that people can dispense with their respective bank accounts and convert all their assets into cryptocurrency that will be housed in the central bank itself. Large-ticket transactions such as home and vehicle purchases can happen virtually in a matter of seconds! Needless to say, retail banks are not too enthusiastic about this revolutionary concept.

Bank of England Governor, Mark Carney is optimistic but cautious about the benefits of the decentralized distributed ledger system to public and the banking sector. When quizzed about repercussions of this radical move, he said, “You don’t end up with those financial stability risks, you get financial stability benefits. And you save huge amounts of computational energy intensity. If we’re going to apply something to the core of the system, it’s going to need to meet five sigma quality rating.”

Mark Carney

What a “Brit(ish) coin” could mean for consumers?

With the bitcoin currency going mainstream, consumers can look forward to saving up majorly on processing fees of financial transactions that are presently being handled by clearing banks for hefty charges. Ben Broadbent, deputy governor (BoE) said in a discussion on DLC in the London School of Economics, “The hope is that, by displacing these various middlemen, a distributed ledger would result in a cheaper and more secure system for providing these services.” 

Bitcoin currency invasion could lead to quick and cheap financial transactions with no need for clearing intermediaries

Quick and affordable monetary transactions will make cryptocurrency a huge hit with public. If they have concerns with their retail banker, they could switch accounts to the central bank in nanoseconds.

Is bitcoin currency a potential threat for retail bankers?

Broadbent dismisses claims that bitcoin currency could ever replace Euros and pounds. But it could hamper commercial banks’ lending ability and rob them of vital deposits from customers. The settlement mechanism of bitcoins could run parallel with traditional banking system, the former preferred for its efficiency and affordability, and the latter acting as a backstop.

Futuristic Plans of Central Bank Digital Currency and their Impact

The cash-rich market of securities and bonds could also shift to the central bank via the distributed ledger system. This could have double implications. For one, closing retail bank accounts and making such retail deposits with the central bank will considerably reduce their liquid resources. They will have to rely on the wholesale market for cash. This hasn’t proved stable in crisis times. Secondly, the central bank will have mostly liquid assets on its balance sheet and therefore can’t suffer a ‘run’.

Points to ponder…

Cryptocurrency craze has made its presence felt in less than a decade. With central banks joining the fray, what remains to be seen is if bitcoin currency will be able to phase out hard cash totally. Doesn’t seem fathomable right now, but things can change in milliseconds in the digital quicksand!

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