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February 26, 2015

Bank of England flirts with Bitcoin

The UK's central bank sees "considerable promise" in distributed ledger technology.

By Alexander Sword

The Bank of England has suggested in a report that it and other central banks may issue digital currencies in the future.

As part of its "One Bank Research Agenda", the UK’s central bank expounded on the possibilities offered by digital currencies due to technology such as blockchain, which distributes the ledger of every transaction across millions of computers.

"The emergence of private digital currencies (such as Bitcoin) has shown that it is possible to transfer value securely without a trusted third party.

"While existing private digital currencies have economic flaws which make them volatile, the distributed ledger technology that their payment systems rely on may have considerable promise.

"This raises the question of whether central banks should themselves make use of such technology to issue digital currencies.

"Further research would also be required to devise a system which could utilise distributed ledger technology without compromising a central bank’s ability to control its currency and secure the system against systemic attack."

The nature of money and how it is issued have been under increasing scrutiny in recent years, with the Bank of England last year publishing a paper stating that the majority of what is used today as money is created as loans by private banks.

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