The Bank Of England (BoE) has announced in a report on Wednesday that the “central bank digital currency” (CBDC) could increase the UK’s GDP “by almost 3%.” The Bank studied the feasibility of introducing a CBDC together with an assessment of probable implications and effects on the economy.
According to the authors of the research, analyst John Barrdear and senior research advisor Michael Kumhof, there are many benefits in an introduction of an official digital currency. As the research informed: “simulations suggest that this policy has a number of beneficial effects.”
According to the report, there are following benefits:
- “An increase in the steady-state level of GDP of almost 3%, due to reductions in real interest rates, in distortionary tax rates, and in monetary transaction costs that are analogous to distortionary tax rates.”
- “A CBDC regime can contribute to the stabilisation of the business cycle, by giving policymakers access to a second policy instrument that controls either the quantity or the price of CBDC in a countercyclical fashion.”
- “Traditional finance has seen a shakeup with the results of the Brexit vote, with institutions warning of en masse relocations to the EU if an agreement is not made to ensure the City of London’s financial prestige.”
Generally, the Bank of England sees any implementation of an official digital currency as ‘Net Positive’ from the economical point of view. But here, they warn that such outcome should not be overstated.
For example, in case of transaction costs reduction, Barrdear and Kumhof added:
“We find it difficult to distinguish how much of any potential gain might reasonably be attributable to the adoption of a distributed payment system as opposed to, for example, a streamlining of multiple overlapping record-keeping systems. Nonetheless, their findings by their own admission represent a “net positive.”
But the Bank of England is just one of a growing number of institutions considering the idea internationally. Among the other central monetary authorities, conducting digital currency research is the central bank of Russia, looking for an introduction of a currency commonly referred to as the “BitRuble.”
Nevertheless, central bank of Russia has already stated before that such introduction of a digital currency would lead to a complete ban on Bitcoin and other cryptocurrencies beyond the bank’s control.
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