Sweden: Bitcoin is wild west, but it could be a central bank’s backup plan

According to an economist at the ‘stability department’ of Sweden’s central bank, the Riksbank, Bitcoin could be used to strengthen financial systems in the face of disruption to a main payment processing network.
The fact that Bitcoin was designed to function beyond the reach of central banks and regulators has often seen it cast as a risk to consumers and those dealing in virtual currencies. As the European Banking Authority (EBA) has previously warned, Bitcoin exchange rates are volatile, exchange platforms and wallets can be hacked, and holders may face tax liabilities.
Hoping to prevent Bitcoin volatility infecting traditional financial systems, in July the EBA then toldEuropean national regulators to “discourage credit institutions, payment institutions and e-money institutions from buying, holding, or selling virtual currencies”.
But what about the risks that regulated financial services themselves introduce – for example, a multi-day outage at a major bank due to underinvestment in IT systems? Consumers in the UK will recall the Royal Bank of Scotland’s glitches of 2012 that held up payments for several days. And when wages are delayed, payments are too, making rent to landlords difficult to pay and bills hard to meet.

This post was published at ZDNet on October 6, 2014.