On 19th July, Dr Ben Broadbent, deputy governor of monetary policy at the Bank of England told the committee that the potential ramifications of using distributed ledger technology were still uncertain.

“…This is a technology very much in its infancy and so its implications are far from clear at the moment,” Dr Broadbent explained.

“No more clear, I imagine, than the potential use of the internet was in 1990.”

The committee heard that placing central bank money into a distributed ledger and allowing wider access to its balance sheet could affect funding lines.

“I mean there are costs and benefits, but it would certainly have material consequences for the funding of banks as it stands at the moment – that extreme version at least.

“One would have to think through those, not just whether it’s technically possible to achieve something like that.”

Dr Broadbent was also asked whether the prospect of a central bank digital currency (CBDC) was some way off being realised.

“If by that you [mean] an all-singing, all-dancing central bank digital currency replacing not just the liabilities we currently have, but prospectively substituting for commercial bank money, then yes, I would say so,” he admitted.

Dr Broadbent referred to a speech he gave in March, in which he suggested that a CBDC could cause money to be moved from commercial banks to the potentially safer central bank.

On 2nd March, Dr Broadbent said: “If all a CBDC did was to substitute for cash – if it bore no interest and came without any of the extra services we get with bank accounts – people would probably still want to keep most of their money in commercial banks.

“But even then it’s likely you’d see some money moving out of existing deposits.

“One imagines it would also be counter-cyclical – resources would flow out of commercial banks during times of financial stress, back towards them when risk aversion is low.”

Regardless of the financial ramifications of a CBDC, Dr Broadbent also explained that the technological demands of verification in a permissionless cryptocurrency such as bitcoin were extremely high.

“Anyone can join in, anyone can transact – it’s entirely anonymous.

“There’s a lot of checking that needs to be done – proof of work is the particular method that that technology uses up a lot of energy.”

As a result, Dr Broadbent claimed that the central bank may have to consider a digital currency with less anonymity in order to make it technologically viable.

“[My guess] is that the systems we’re talking about here are called permissioned systems so that you don’t operate on an anonymous basis and the participants in a ledger for clearing securities would to one degree or another know each other already.

“And you would sacrifice some degree of anonymity, but you would also save in the costs of operating such a system.”