On 19 July, the Economic Affairs Committee took evidence from the Bank of England, representatives of the blockchain industry and academics for its one-off inquiry into distributed ledger (“blockchain”) technology.
The Committee explored a range of issues relating to blockchain technology including:
- How can the Government make use of blockchain? Could it be used to collect taxes or pay benefits?
- What happens if the technology goes wrong?
- How should blockchain be regulated?
- Could blockchain be used to create a central bank digital currency?
The Deputy Governor of Monetary Policy at the Bank of England, Ben Broadbent, was generally positive, acknowledging that the benefits are clear, but also noting that it could only be achieved at significant cost. He dispelled the idea that the Bank of England would ever operate a central bank digital currency and suggested that market participants would prefer a system which included regulatory oversight rather than an open, permissionless bitcoin-like system.
What this means for you
This is the first major committee discussion of the technology within Parliament and is indicative of the UK government’s interest in exploring its possible uses. This is good news for financial services clients who think it could be the future of financial transactions. The distributed nature of a blockchain database makes it less susceptible to hacking and keeps the data secure and private. If implemented, banks could begin to share data using a custom version of blockchain, cutting out the middleman and reducing manual processing. This would increase the speed of transactions and ultimately reduce costs. FinTech Network have put together a whitepaper which provides a comprehensive introduction to blockchain technology.