Any digital record of bank deposits opens up the possibility that its underlying set of data may be copied and that the nominal amount deposited may be spent more than once. With conventional bank deposits, banks monitor the digital records and are trusted to ensure their validity. With so-called “digital currencies” like Bitcoin, by contrast, the ledger containing the record of all transactions by all users is available to the public. Rather than requiring users to have trust in a central third party, reliance is placed upon the network and the algorithmic rules established to reliably change the ledger. The authentication technologies underpinning Bitcoin – known as distributed ledger or Blockchain-technologies – enable multiple instances of data to be synchronized and updated.

The attractions of this technology for processing and accounting for transactions look set to move further into the mainstream of commerce. In January 2016, the UK government published a report setting out how this technology could transform the delivery of public services and boost productivity. On 15 February 2016, the German Financial Supervisory Authority (BaFin) issued a statement regarding possible fields of application of distributed-ledger-technologies (DLT). In addition, a number of banks have already been exploring the possible uses of Blockchain in the financial services market with several of them investing in companies developing the technology. For example, the Bank of England even stated in its Quarterly Bulletin 2014 Q3 that it was “at least conceivable that a financial institution could issue IOUs [I Owe You] to the public that were denominated in a digital currency.” Moreover, the Australian Stock Exchange recently announced that it is looking at using distributed ledger technology for clearing and settlement services in the cash equities market. We also expect application of this technology in the healthcare industry to be developed further in 2016.