Bitcoin is an "interesting" technology, says newly appointed Bank of England deputy governor Ben Broadbent.
Speaking before the Treasury Select Committee (TSC), Broadbent said that "the payment technology is interesting" but that the idea that it is a proper currency is "much less clear".
Now responsible for monetary policy, Broadbent said that the first lesson he was taught in monetary economics was that money should be a "store of value". He expressed concerns that if a currency's value can move by 10 per cent in one day, then it's probably not a great store of value, and that it was backed by no central bank.
TSC member Steve Baker MP asked whether the pound had provided a good store of value over the last 200 years. Broadbent suggested that in real terms sterling has fared well, although we've seen rapid nominal decline against the dollar, especially before 1992 as the UK "didn't have inflation targeting and had much higher inflation".
While not considered a threat to traditional fiat currencies, it's certainly a threat to traditional payment processors already, hence Broadbent's comments about that payment tech. It's possible to send vast sums via cryptocurrency almost instantly. And the lower fees associated with digital currencies open up a lot of options for those who wanting to send cash internationally without getting stung.
In March, one user sent $11,000 with a tweet in almost no time using Dogecoin, a currency similar to Bitcoin. One Reddit user than calculated that sending that money via PayPal would incur fees of around $50-160, while the Dogecoin transfer cost $0.01. And while the PayPal transfer would take days to clear, cryptocurrencies take seconds to deliver.
Big financial corporations are now starting to pay attention to cryptocurrencies. Capital One, one of the biggest banks in the US, is currently looking for a data scientist to invesitgate the role of alternative currencies. TSC chairman Andrew Tyrie MP raised a question about the digital currency at the end of a session that saw Broadbent discuss risks to the UK economy and the outlook for interest rates.