Bank of England deputy governor for monetary policy Ben Broadbent argued in a speech today that bitcoin is unlikely to obtain widespread adoption – but that central bank-issued digital currencies could have a big impact on the global financial system.
In a talk at the London School of Economics, Broadbent focused specifically on the evolving relationship between digital currencies and central banks, a topic that Bank of England staffers have broached in the past .
The deputy governor dismissed the possibility that digital currencies such as bitcoin could become widely used as a payment mechanism or a unit of account, stating: "The main point here is that the important innovation in bitcoin isn’t the alternative unit of account – it seems very unlikely that, to any significant extent, we’ll ever be paying for things in bitcoins, rather than pounds, dollars or euros – but its settlement technology, the so-called ‘distributed ledger’." Broadbent used his speech to discuss the potential characteristics of a future central bank-issued digital currency, as well as the impact this issuance could have on the commercial banking system.
While highlighting some of the benefits of a central bank-issued digital currency, he notably remarked that those banks could see a degree of impairment if adoption took hold.
He also discussed the application of distributed ledgers to the financial system, stating that "decentralised virtual clearinghouse and asset register[s]" may be a better way of describing the technology. Impact on banks
Broadbent suggested that people who previously kept their funds in a commercial bank might be more immune from a bank run if that money is kept under the auspices of a central bank instead.
"Currently, retail deposits are backed mainly by illiquid loans, assets that can’t be sold on open markets; if we all tried simultaneously to close our accounts, banks wouldn’t have […]
