Bank of England considers cutting commercial banks out of the payments system

The Central Bankers' Bold New Idea: Print Bitcoins

By Jon Sindreu
The Wall Street Journal
Tuesday, July 19, 2016

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 on Monday, economists at the Bank of England advocated that central banks issue their own kind of digital currency. Using the U.S. as a case study, they argued it could give a permanent boost to the economy of around 3%, as well as providing policy makers with more effective tools to tame financial booms and busts. ...

But the main appeal of bitcoin isn't that it's electronic. In fact, most money already is: Only about 5% of money in the economy is physical cash; the rest is bank deposits.

Rather, a digital currency offers a decentralized way to make payments without needing commercial banks to stand in the middle and record the transaction. Payments are validated by other users in a global network of computers and then updated in a shared record known as the blockchain.

Central banks across the developed world, including the Bank of England and the Bank of Canada, are now studying the potential of this technology. Were central banks to issue digital cash and make it available to the public, money would exist electronically outside of bank accounts in digital wallets, much as physical bank notes do. This means households and businesses would be able to bypass banks altogether when making payments to one another. ...

... For the remainder of the report:

http://www.wsj.com/articles/the-central-bankers-bold-new-idea-print-bitc...

... For the Bank of England research paper cited in this report:

http://www.bankofengland.co.uk/research/Documents/workingpapers/2016/swp...