24 June 2017
visit www.finastra.com

Private digital currencies need regulation to flourish - Bank of Canada research

20 February 2017  |  10610 views  |  0 cryptocurrencies

Digital currencies such as Bitcoin will not be safe without government intervention and are likely to be counterfeited, according to a Bank of Canada report drawing on the lessons off private bank notes in the 1800s.

The paper examines what happened when both private bank notes and government issued notes were simultaneously in circulation, arguing that both share many characteristics with today's digital currencies.

The authors conclude that before the Bank Act of 1890, private bank notes were only "relatively" safe and not a uniform currency. Meanwhile, government issued 'Dominion' notes were safe but were not a uniform currency until 1882.

Drawing lessons from this experience, the report argues that "well designed and managed private digital currencies could circulate widely but only with appropriate government regulation to ensure their safety, soundness, and uniformity".

In addition, private digital currencies are likely to be counterfeited and are unlikely to be inflationary. And, while a central bank can always bet its digital currency into circulation, this will not necessarily drive out private alternatives.

Read the full paper (PDF)

 

Comments: (0)

Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

Bank of Canada DLT experiment raises PFMI questions

Bank of Canada DLT experiment raises PFMI questions

13 February 2017  |  13739 views  |  0 comments | 6 tweets | 10 linkedin
Bank of Canada trials blockchain-based digital dollar

Bank of Canada trials blockchain-based digital dollar

16 June 2016  |  15156 views  |  3 comments | 33 tweets | 33 linkedin
Bank of Canada ponders bitcoin's effect on monetary policy

Bank of Canada ponders bitcoin's effect on monetary policy

17 November 2015  |  10846 views  |  0 comments | 16 tweets | 10 linkedin

Related company news

 

Related blogs

Create a blog about this story (membership required)
visit www.events.sap.comvisit www.response.ncr.comdownload the report now

Top topics

Most viewed Most shared
Live: EBAday 2017, day twoLive: EBAday 2017, day two
9207 views comments | 4 tweets | 5 linkedin
Worldpay pilots app-only mPOS for small retailersWorldpay pilots app-only mPOS for small re...
8998 views comments | 18 tweets | 27 linkedin
Live: EBAday 2017, day oneLive: EBAday 2017, day one
8385 views comments | 3 tweets | 4 linkedin
UK banks will need to change one million sort codes under ring-fencing rulesUK banks will need to change one million s...
7985 views comments | 8 tweets | 25 linkedin
What Banks and their customers can expect for the futureWhat Banks and their customers can expect...
6735 views comments | 7 tweets | 10 linkedin

Featured job

Six Figure Base + Commission + Stock Options
London

Find your next job