Through time, banks and other financial institutions have taken different approaches when it came down to dealing with the Bitcoin revolution. With this in mind, it seems like the Bank of England will take a different approach: if you can’t beat them, join them.
According to a research paper published this week by the bank, economists working for it have stated that central banks should issue their own digital currency. By using a case study carried out in the US, they concluded that doing so is likely to give national economy a boost of at least 3%, while also offering policy makers the tools needed to handle financial crashes and booms.
The idea is that just like fiat, using cryptocurrencies can boost the amount of money in circulation. Additionally, digital currencies also come with various benefits such as instant and low-cost transfers. However, this isn’t what banks are looking for in particular. Instead, economists believe that digital currency adoption by the banks is a must due to their decentralized way to make payments. This means that commercial banks are excused of having to be the middleman for most transactions.
If banks would offer digital currencies, then people would be able to keep money in their wallets, hence bypass banks and no longer have to pay monstrous fees. While this would trigger a reshaping of the world’s financial system, it would also allow banks to join in on the venture.
If this decision would be taken worldwide, banks would benefit, yet members of the digital currency community will likely not be impressed. Issuing digital currencies would allow banks to control the amount of money present in the economy, thus granting them the possibility to directly control value, inflation and economic growth. After all, the main ideology of bitcoin is to advocate for a world where people own the money and are solely responsible for its value and use.
Charles Goodheart, a professor at the London School of Economics stated that: “It’s the private sector which decides whether actually to accept those terms and conditions and ask the banks to give them the loan”.
Another prominent member of the banking community said that: “Making central bank money widely available could have an impact on deposits held at commercial banks and a knock-on effect on the banking system”.
To put things better into perspective, if banks were to begin issuing digital currency, this would surely lead to worldwide adoption of the system. The downfall is that bitcoin and other altcoins will likely suffer, and that the dream of a world with a people-based financial system would no longer become a reality.
Based on everything that has been outlined so far, what do you personally think about this advantages and disadvantages of banks issuing digital currency? Let us know your thoughts in the comment section below.