The Bank of England (BoE) is reportedly applying a wider evaluating scope for cryptocurrency, believing they could function as the basis of a “new monetary order.”
Specifically, Andy Haldane – the bank’s chief economist and sitting member of the Monetary Policy Committee – reportedly shared his remarks of how a digital currency with a wide adoption could do a lot of good for financial stability.
Per Haldane, The “traditional model of banking: could experience a disruption caused by a widely utilized digital currency, further stating that an increased level of attention needs to be available to monitor the “the potential longer-term benefits of such a structural shift.”
One particular advantage is reportedly the appearance of what is perceived as narrow banking, which would enable partial segregation of banks’ “safe” payments-based activities from their riskier credit business.
“In principle, separating safe payments and risky lending activities could lead to a closer alignment of risk and duration on the balance sheets of those institutions offering these services.” Haldane further remarked.
In terms of the monetary policy, Haldane reportedly looks forward to a digital currency being able to make the prevalence of negative interest rates less severe, or even able to nullify. In his idea, zero-bound or negative rates “arise from a technological constraint on the ability to pay or receive interest on physical cash.”
“In principle, a widely-used digital currency could mitigate, if not eliminate, that technological constraint by enabling interest rates to be levied on retail monetary assets.