Digital currencies such as Bitcoin will not replace conventional money, but the technology underpinning them could make customer deposits safer and damage lending, according to a deputy governor of the Bank of England.
Ben Broadbent warned that a central bank digital currency could offer depositors such complete security that it might end up sucking money out of commercial banks and hurt lending.
As central banks are so-called narrow banks that “can’t suffer a run”, they would offer customers security in times of distress. Consequently, commercial banks could suffer deposit flight in a crisis like that from Northern Rock in 2007.