Digital currencies may reshape payments, Bank of England argues

The One Bank Research Agenda from Bank of England investigates issues beyond the UK central bank’s traditional scope to decipher how monetary policy interacts with developments such as climate change and increasing life spans.

The views offered on Bitcoin in the agenda mark a stark contrast to the Bank of England’s previous dismissal of Bitcoin’s ability to function on a wider scale. The Bank of England raised the question of whether central banks should make use of such technology to issue digital currencies. In doing so, the financial authority also addressed the economic, technological and regulatory challenges it would face if it did so.

The report outlined the costs and benefits of creating a new form of central bank money and making it widely accessible. The research also looked into how this development may impact existing payment and settlement systems, while analysing the implications for government-backed deposit insurance if central bank money was made widely accessible to both households and businesses. The report questioned whether digital currencies issued by the central bank should be remunerated and whether this should be linked to the country’s official interest rate.

Other aspects of the research included the implications for the availability of credit, the costs and benefits of different central banks using a common platform for issuing digital currencies, and how could institutions offering access to central bank issued digital currencies be regulated.