Well, it’s just two days in 2018 and we have some interesting news coming our way. Bank of England, the country’s three hundred years old bank, is working out on the possibility of a state-owned digital currency to be launched this year.
As reported by The Telegraph, Bank of England has set up a research unit which will probe the possibility of a digital currency which could be pitched against rivals like Bitcoin and Ethereum. The research unit is also studying whether this digital currency can be linked to Sterling.
The research unit is expected to submit its report by the year-end. While commenting the Bank of England’s study on Bitcoin, Governor – Mark Carney said we are “pretty active in it but we’re also disciplined. If we’re going to apply something to the core of the system, it’s going to need to meet five sigma quality rating.”
Just before Christmas 2017, Mr. Carney has reportedly had discussions with other central banks of U.K. regarding this project and has informed the Treasury Select Committee as well. Mr. Carney confirmed this by saying “I have participated in discussions with the major central banks on this issue.”
Mr. Carney has been quite optimistic about the underlying blockchain infrastructure which is the decentralized distributed ledger. In the last summer, Bank of England has reportedly used the blockchain technology to test whether it can be used for settlements between central banks.
Mr. Carney told the Treasury Select Committee that the results of the test were quite successful. He further stated “The underlying technology is actually of a fair bit of interest. We are working with it at the Bank of England. Most interesting application that would be beneficial for financial stability and efficiency would be using the blockchain technology for ‘settlements’ between central banks. We are on the case.”
As per the report from the local media, if the proposed digital currency gets a legal status, Mr. Carney can also limit its use as a settlement between the central banks. Moreover, there is a doubt whether it can be exactly called a cryptocurrency and the basic handling of cryptocurrencies is absolutely free from any third-party control and regulation.
If the digital currency is brought to retail transactions, this will certainly pave a new path for establishing completely different banking practices allowing customers to store their digital currency with the central banks. This looks really surprising because it would then mean the end of retail banking practices.
It remains to be seen as how things unfold in the year ahead.