Central banks look to bitcoin-style digital currency

When it comes to bitcoin and digital currencies, central banks might be considering the adage: ‘If you can’t beat them, join them.’
In a research paper published this week, economists at the Bank of England advocated that central banks issue their own digital currency.
Using the US as a case study, they argued it could permanently boost the economy about 3 per cent, as well as giving policy makers more effective tools to tame financial booms and busts.
BoE economists John Barrdear and Michael Kumhof write that ‘reductions in real interest rates, distortionary taxes, and monetary transaction costs’ would boost the economy.
Much like physical cash, digital currencies like bitcoin allow direct payment from one person to another, but they also have all the advantages of bank transfers, because payments can be made instantaneously across the globe.
But the main appeal of bitcoin isn’t that it’s electronic. In fact, most money already is: only about 5 per cent of money in the economy is physical cash, the rest is bank deposits.
Rather, a digital currency offers a decentralised way to make payments without needing commercial banks in the middle to record transactions. Payments are validated by other users in a global network of computers and then updated in a shared record called the blockchain.

This post was published at The Weekend Australian