The Bank of England fears that if using Bitcoin and other criptomonedas spreads, it could limiting its capacity to govern monetary forces in the economy of the United Kingdom and jeopardize the financial stability.
Explains it in a report published yesterday, entitled "Economy of the digital currencies", in which, among other things, analyzes the hypothetical massive adoption of the cryptocurrency. In a scenario in which the economy of the United Kingdom is, "bitcoinizada", as they themselves define, the monetary authorities of the central bank would be increasingly unable to influence prices and economic activity as a whole.
"Given that in this extreme scenario all payments would take place outside the British pound as currency basis for practically the whole of the economy, the ability of the Bank to influence pricing and real activity would be seriously handicapped", explained verbatim in the report.
"Where an adoption limited as payment system is achieved, it is unlikely that you undermine the ability of the Bank to ensure monetary stability. Aglo that could, in theory, change if it abandons the pound sterling in favor of an alternative currency in a significant fraction of the economy, a highly unlikely scenario today,"continues.
In this sense, he says that currently it is not a major risk due "to the small size of these systems", but adds that this may change if they grow "significantly".
"The Bank continues to monitor digital currencies and risks posed to its mission. If a subgroup of people held transactions exclusively in a digital currency, then the ability of the Bank to influence the demand for this group may potentially be affected", admits.
The text quotes the price volatility and the risk of diminishing returns for miners as problems that will keep the cryptocurrency as a payments infrastructure under the opinion of their authors, auxiliary.
The report shows that the Bank has a very technical about the functioning of Bitcoin vision, since they have also published another report entitled "Innovations in payment technologies and the emergence of digital coins", written by the same authors. In both texts, they point out that the technology "blockchain" has a great potential for application in other areas and recognize the Protocol Bitcoin as a "genuine technological innovation."
"The key innovation in digital currencies is 'distributed accounting' which allows you to operate a payment system in a decentralized manner, without intermediaries such as banks. This innovation is based on advances in a range of disciplines that include cryptography (secure communication), theory of the game (strategic decision making) and peer-to-peer network (network of connections without a central coordination)."
"The technology of distributed accounting represents a fundamental shift in how payment systems could work." And, in principle, this decentralized approach is not limited to payments", says the report by the Bank.
The report cites the price volatility and the risk of diminishing for the miners returns as systemic problems, which, in view of its authors, will keep digital currency becomes more than an auxiliary payments infrastructure.
Bitcoin as money
One of the main issues discussed in the report of the Bank of England is whether Bitcoin is a form of money. The study three forms of money: as a repository of value and medium of Exchange and unit of account.
"In theory digital currencies could serve as money to anyone with a computer or use the Internet-enabled device. Today, however, digital currencies are money roles only to the extent, and only to a small number of people. "It is likely that currently serve regularly three purposes for perhaps only a few thousands of people around the world, and even so only in parallel with traditional currencies of its users."
However, this may result in changes. The report highlights that, long-term, increasing reliance on digital currencies could lead to wider use as a store of value and medium of Exchange. For accounting purposes, the Bank of England recognizes that very few companies, if any, have their accounts in bitcoin. But that where this practice emerged, this element of the definition of money might be most relevant for digital currencies.
"Digital currencies today do not play an important role as money in society. But they may have the potential to display, at least some of the functions of money, over time."
These are already three studies that the Bank of England published on Bitcoin this year. The ant