The economics of digital currencies

This article explores the economics of digital currencies — schemes that combine new payment systems with new currencies — and provides an initial view on the consequent implications for the Bank of England’s objectives to maintain monetary and financial stability in the United Kingdom. Any potential risks to monetary or financial stability posed by digital currencies will depend on how widely they are used, both today and in the future. The article therefore begins by examining the extent to which digital currencies are currently used as a form of money. As part of evaluating the likely growth in digital currencies’ usage over time, it next examines the sustainability of the low transaction fees offered by digital currencies at present.