Share this article
Central Bank Digital Currencies Could Boost GDP, Bank of England Says
The Bank of England has released new research suggesting a central bank-issued digital currency could lead to an increase in GDP.
By Stan Higgins
Updated Sep 11, 2021, 12:22 p.m. Published Jul 18, 2016, 8:01 p.m.
Make us preferred on Google
The Bank of England has released new research suggesting that a central bank-issued digital currency could lead to an increase in gross domestic product.
The conclusions were drawn from a working paper published today that examined how a central bank-backed digital currency (referred to as a CBDC in the paper) could yield macroeconomic benefits, while providing banking regulators a clearer picture of the financial system.
STORY CONTINUES BELOW
Don't miss another story.Subscribe to the Crypto Daybook Americas Newsletter today. See all newsletters
The authors wrote:
"First, it leads to 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. Second, a CBDC regime can contribute to the stabilization 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.”
That said, the authors state that there are potential issues inherent in the concept and that "there remains a clear concern" about the risks in transitioning to a "different monetary and financial regime".
These concepts were explored several months ago in a speech by Ben Broadbent, the Bank of England’s deputy governor for monetary policy, who said in March that while such a system could provide greater visibility for regulators, UK banks could see an outflow of deposits.
Broadbent is one of several witnesses set to appear tomorrow before a committee of the House of Lords, the upper chamber of the UK parliament.
The full Bank of England working paper can be found below:
Image via Shutterstock
More For You
More For You
Crypto custodian BitGo a potential acquisition target for Wall Street firms, analysts say
Compass Point and Canaccord call BitGo a potential acquisition target and defend the stock despite its weak debut, citing growth in institutional crypto infrastructure.
What to know:
- Wall Street analysts say BitGo’s expansion into full-service institutional crypto finance could drive long-term growth and make it an attractive acquisition target for traditional financial firms.
- Analysts argue that investors are overlooking BitGo’s potential to cross-sell prime brokerage-style services, which could significantly boost revenue if it can narrow the gap with rivals like Galaxy and Coinbase.
- Despite BitGo’s stock falling more than 40% since its January IPO, some analysts view the selloff as an overreaction and maintain buy ratings, citing the company’s solid competitive moat and strategic value to big banks entering crypto.
