Bank of England: Bitcoin is “Harder Money” than Gold Due to Deflation
During a presentation on digital currencies entitled “Old Money, New Money,” Andy Haldane, Chief Economist and the Executive Director of Monetary Analysis and Statistics of the Bank of England and his team stated that “Digital currencies are ‘harder money’ than a gold standard” because “sustained adoption [of bitcoin] would see ongoing deflation.”
Haldane began by explaining the basics of bitcoin and its “advantages and disadvantages” as a peer to peer payment system. Haldane and his team described bitcoin in 4 main aspects:
- Distributed: greater resilience, no central control, a coordination problem
- Pseudonymous (and possibly anonymous)
- Push-only (no ‘direct debits’): payments are final and cannot be imposed
- Individually cheap, but socially expensive (but this could be fixed)
Haldane continued to expound that bitcoin could disrupt the traditional financial industry, due to the world’s severely underbanked regions and the surge of increase in smart phone usages.
2 million UK adults do not have bank accounts and 2.5 billion people in the world have no access to financial services, said Haldane. However, given the estimate that 80% of the world’s population will own a smartphone within 5 years, Haldane believes that many could turn toward digital currency to store their savings.
Despite his positive comments and presentation on bitcoin, Haldane brought a closure to his talk by saying, “The least interesting thing about Bitcoin, and other distributed ledger systems, is that they are digital. Digital currencies are important for how they deploy the available technology in a new way.”