In a research paper, part of the One Bank Research Agenda, the Bank of England admits that the present financial system is facing strong challenges, some of them created by the development of new technologies.
“Digital currencies, potentially combined with mobile technology, may reshape the mechanisms for making secure payments, allowing transactions to be made directly between participants. This has potentially profound implications for a financial system whose payments mechanism depends on bank deposits that need to be created through credit,” explains the bank.
The document mentions Bitcoin, whose blockchain-based technology is described as promising, and questions the possibility for central banks to create their own Bitcoin-like currencies:
“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.”
“Creating such a system would entail creating a protocol for value transfer over the Internet, akin to what Berners-Lee (1989) did for information,” concludes the document.