Could the Bank of England one day embrace Bitcoin?

Jessica Morris
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The Bank of England will conduct more research into digital currencies (Source: Getty)

Cryptocurrency bitcoin, in combination with mobile technology, could revolutionise the way we make purchases, which has prompted the Bank of England to conduct more research into the area.

The bank said it could defunct banks' roles as middle men by allowing secure payments to be made directly.

"This has potentially profound implications for a financial system whose payments mechanism depends on bank deposits that need to be created through credit," it said in a discussion paper.

Yet, despite its potential importance, getting on board with digital currencies like Bitcoin presents challenges.

"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."

So, before Bitcoin fanatics get too excited, the central bank would need a rationale for issuing a digital currency, as well as addressing the economic, technological and regulatory challenges of doing so.

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