The Bank of England (BoE) has claimed that digital currencies do not currently post a material risk to monetary or financial stability in the UK.
The financial institution made the statement in a new report, The Economics of Digital Currencies, which investigates the effect digital currencies such as Bitcoin could have on the economy.
BoE says that digital currencies could potentially serve as money for anybody with an Internet-enabled device, they currently only act as money to limited extent for just a few people.
The report adds that widespread adoption of digital money faces significant challenges because of the way such schemes are designed.
“Both digital currencies’ status as money and the distributed ledger technology used by them have potential to develop over time,” says the document.
“Most digital currencies, at present, deploy fixed eventual money supplies, although this not strictly an essential feature.
“Usage of digital currencies is presently very low and, as currently designed, there are a variety of incentive problems that are likely to prevent their widespread adoption in the long run,” it adds.
The BoE report claims that a scenario where Pound Sterling was abandoned in favour of an alternative currency by a significant portion of the economy is highly unlikely.
The financial institution also says that should a digital currency attain “systemic status,” appropriate regulator supervision could mitigate any potential risks.
The document notes that UK citizens hold Bitcoins combined make up to 300 transactions a day and holdings are an estimated £60m – which represents less than 0.1% of Sterling notes.