The Bank of England (BoE) warned that the growing popularity of bitcoin could threaten the financial stability of the United Kingdom (UK) over time if the virtual currency gains mass acceptance.
However, in a series of reports the BoE says that restrictions on the number of coins in circulation, its inherent volatility and the prospect of higher transaction costs make it unlikely than it will attract enough users to supplant the existing banking system.
According to the BoE the current centralised banking system, which stores and protects customer funds, will continue to dominate retail and business transactions “over any foreseeable horizon” under the current design of digital currencies.
The UK central bank’s view was reported as the US bitcoin service firm Coinbase announced plans to launch a consumer service across a large part of the eurozone .
The company said it had found a way to link a bitcoin ‘wallet’ service to the euro payments system, making it possible for users to send money to and from their bitcoin account. The service will be rolled out in 13 of the 18 eurozone countries: Italy, Spain, France, Belgium, the Netherlands, Austria, Cyprus, Finland, Greece, Latvia, Malta, Portugal, and Slovakia.
Traders of the virtual currency in these countries will be able to buy or sell bitcoin using a European bank account, and during the beta phase, will be able to trade on a value limit of €500 per day. Coinbase said it expects this rate to rise once the beta phase is complete.
To date, Coinbase has only operated in the US where 1.6m consumers, 36,000 merchants and 6,000 developers use the company’s system.
Sentiment in the financial services sector deteriorated in the three months to September, as firms digested the challenges of lower interest rates and the uncertainty caused by the vote to leave the European Union (EU), according to the latest CBI/PwC Financial Services Survey.
However, a London summit on the industry’s introduction of the technology cautions that testing and acceptance are still at an early stage and firms should proceed with caution.
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