Is bitcoin the future of finance? Photograph: Alamy The Bank of England (BoE) could become the hub of a bitcoin-style digital currency that sidelines high-street banks and cuts the costs of financial transactions, according to a senior executive at the UK central bank .
Ben Broadbent, BoE deputy governor, said a new system of holding cash in a banking version of the cloud, with encrypted keys to protect accounts, would likely prove a huge hit with customers, denying commercial banks vital deposits and potentially hamper their ability to lend money.
Broadbent, formerly a Goldman Sachs economist, dismissed claims that bitcoin was in a position to replace pounds and euros. Instead, the structure behind the most renowned digital currency could be adopted to manage the circulation of existing currencies.
Speaking at the London School of Economics on Wednesday, he said the settlement technology behind digital currencies, known as a distributed ledger, could become a parallel form of distributing funds and making financial transactions with the Bank acting as a backstop.
In this way, fans of digital currencies would achieve one of their main aims, which is to reduce the cost of electronic transactions that are currently handled by the major clearing banks. “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,” he said.
Banks are at the heart of the current financial structure and provide a trusted platform for maintaining and protecting deposits. They also act as counter-parties in transactions, making sure that funds have moved from one account to another.
Broadbent said he was treading carefuly into the debate over the nature of money and how it was verified in transactions between customers, businesses and their banks. Yet he saw a way for the pound to exist on a […]
