{"id":80319,"date":"2018-05-30T18:36:20","date_gmt":"2018-05-30T18:36:20","guid":{"rendered":"http:\/\/www.bnreport.com\/boe-bitcoin-rival-would-strengthen-effects-of-monetary-policy-changes\/"},"modified":"2018-05-30T18:36:20","modified_gmt":"2018-05-30T18:36:20","slug":"boe-bitcoin-rival-would-strengthen-effects-of-monetary-policy-changes","status":"publish","type":"post","link":"https:\/\/www.bnreport.com\/en\/boe-bitcoin-rival-would-strengthen-effects-of-monetary-policy-changes\/","title":{"rendered":"BoE bitcoin rival would “strengthen” effects of monetary policy changes"},"content":{"rendered":"

<\/p>\n

A central bank-run digital currency to rival cryptocurrencies such bitcoin and ethereum could make monetary policy changes a more effective tool, according to Bank of England<\/a> research.<\/p>\n

The Bank has recently released a flurry of research weighing the potential risks and benefits of central bank digital currency (CBDC), with the potential to revolutionise monetary policy.<\/p>\n

\u201cA CBDC that is a close \u2013 but not perfect \u2013 substitute for bank deposits may strengthen the transmission of monetary policy changes to the real economy\u201d, according to a blog post published today by Bank researchers Jack Meaning and Ben Dyson summarising recent research.<\/p>\n

Read more<\/strong>: BoE economists make "material step forward" in central bank crypto debate<\/a><\/p>\n

The Bank says it is not currently planning to issue its own digital currency, which Swedens Riksbank is actively considering.<\/p>\n

Nevertheless, the Bank has undertaken a significant body of work investigating how a central bank digital currency would work in practice, including a separate research paper which claimed an important \u201cstep forward\u201d in the design of a currency which would not leave commercial bank vulnerable to a run.<\/p>\n

The research on monetary policy transmission shows that a currency which pays interest on balances, alongside offering payment services, would allow the Bank of England to gain greater control over monetary policy.<\/p>\n

Read more<\/strong>: Fed official warns bitcoin could pose a threat to financial stability<\/a><\/p>\n

\u201cWith careful design choices, a CBDC need not be disruptive to the conduct of monetary policy,\u201d the researchers wrote.<\/p>\n

Commercial banks would be forced to react more quickly than they do currently to raise or lower interest rates in line with the central bank rate to avoid losing deposits.<\/p>\n

The authors said: \u201cThis would result in an increase in both the strength and speed of pass-through from the policy rate to these other interest rates, especially as technology and regulatory changes make it easier to switch balances from one account to another.\u201d<\/p>\n

The prospective currency would also greatly improve the functioning of quantitative easing, the asset purchases used by central banks to stimulate demand when interest rates cannot fall any further.<\/p>\n

A digital currency would remove the need for banks as an intermediary for buying the government bonds used in quantitative easing, the researchers said: \u201cThe central bank could pay for assets from non-banks directly with central bank money (CBDC), by-passing the banking sector altogether.\u201d<\/p>\n

Read more<\/strong>: Janet Yellen: QE's day will come again<\/a><\/p>\n

<\/a><\/strong> <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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