Central Banks Explore Blockchain to Create Digital Currencies

According to a Financial Times article, central banks of the U.K., Russia, China, Canada, and Australia are seeking to create digital currencies and put money on the blockchain. The Bank of England is already considering what a central bank-issued digital currency could mean and is assessing the associated risks and benefits. As bitcoin, the cryptocurrency, operates through blockchain, it does not carry the cost of handling cash and can be tracked as it moves through the financial system. These advantages promise benefits in cutting risk, fraud and executing monetary policy for central banks.

Though worries about bitcoin threatening national currency are fading, the challenge now is a need for cross-border cooperation in regulating digital currency. Dong He, who has led research by the International Monetary Fund into digital currencies, says, “We don’t see private currencies having an edge over fiat currencies [those declared by central banks to be legal tender].” Mr. He added that monetary authorities must come together to start thinking about the necessary regulation of digital money that will be flowing around the world.

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