The central bank in the UK, the Bank of England (BoE), has expressed its desire to have its own digital currency like Bitcoin. In fact, the central bank is seeking a cryptocurrency by name RSCoin, which is somewhat similar to the Bitcoin. According to the BoE, the centralized version of Bitcoin called RSCoin would be completely controlled by the central bank.
Financial institutions around the world, including securities exchanges, have not only started favoring, but also investing in the blockchain technology, central banks have moved one step ahead and have started borrowing from the technology that Bitcoin is making use of. This is to say that a number of central banks have revealed plans to develop a digital currency of their own. The People’s Bank of China (PBoC) is moving toward the launch of its own cryptocurrency. In a release on January 20, 2016, the PBoC said that a meeting was held in Beijing to discuss the possibility of having its own digital currency.
A report released recently in the MIT Technology Review showed that that the UK’s central bank had approached researchers for designing a digital currency that is similar to the Bitcoin and is cryptographically secure. According to the report, two researchers at London’s University College have developed a currency system called RSCoin. The names of researchers who have developed RSCoin are George Danezis and Sarah Meiklejohn.
RSCoin Is a Centralized Version of the Digital Currency Bitcoin
The BoE’s digital currency RSCoin also makes use of cryptography in order to make it not only tamper proof, but also resistant to counterfeiting. However, the digital ledger to be used by the cryptocurrency will be held and maintained within the central bank’s confines. According to the report, a specific encryption key will be required to access the RSCoin’s system. Further, the key will be available only with the UK’s central bank.
In addition, Meiklejohn noted that the central bank will choose several third-party collectives, such as commercial banks, for partaking in the central digital ledger. The BoE will be assisted by the commercial banks in processing and submitting new transactions which are to be included in the ledger held by the central bank. According to Meiklejohn, there are a couple of differences between RSCoin and Bitcoin. RSCoin comes with a centralized design and unlike Bitcoin it is capable of handling extremely large number of transactions.
Introducing the RSCoin, the centralized version of Bitcoin, the developers have stated in a paper on Centrally Banked Cryptocurrencies that the complete control of the digital currency framework and its supply would rest with the central banks. However, they would rely on a set of distributed authorities or mintettes in order to prevent double spending. Further, they noted that the central banks would follow a centralized monetary policy and RSCoin would ensure strong transparency as well as auditability guarantees.
As of now, the digital currency has been subjected to tests using thirty numbers of computers within a cloud computing platform that was made available by Amazon. Further, Meiklejohn said that discussions are being held with the BoE regarding further research and how it can be implemented in a real life situation.
In addition, she noted that the idea of a digital currency may be an attractive proposition as far as central banks are concerned because the inherent ledger of all the transactions that are being carried out. In what might be considered as a nod towards the way in which the Bitcoin works, she also noted that the central banks could publish the ledger of RSCoin for the information of the public. However, this is possible only if the banks choose to make transactions transparent. Finally, she added that the RSCoin, the centralized version of Bitcoin, has been designed in such a way that the controlling central banks can decide as to whether they should make all or some of the transactions partially or fully anonymous.
In this connection, it is important to note as to what Ben Broadbent, Bank of England Deputy Governor, said in a speech at the London School of Economics. He said that technology has been able to break down the finance’s traditional boundaries and that ordinary savers would be able to open an account with the central bank by implementing digital technologies that are similar to the ones employed by Bitcoin.