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Bank of England worried about bitcoin fraud risk, threat of deflation

Bank of England isn't on the bitcoin bandwagon, worried about fraud, volatility, and fixed supply issues
By: Michael Hatamoto | Business, Financial & Legal News | Posted: Sep 11, 2014 2:48 pm

The Bank of England is worried bitcoins and other cryptocurrencies could suffer long-term fraud potentially hurting the British economy. There also is a higher level of deflation using the currency, as it's not supported by a banking system - and with more than 1 million bitcoin users across the world - businesses are willing to gamble with the digital currency.




Although volatility and additional fees for transactions are likely with bitcoin, the Bank of England is more concerned about the fixed supply of bitcoins for customers.


"The inability of the money supply to vary in response to demand would likely cause greater volatility in prices and real activity," according to the Bank of England. "A significant risk to digital currencies' sustained use (is) that they will not be able to compete on cost without degenerating... to a monopoly miner, thereby... exposing them to risk of system-wide fraud."


Regardless of what banks and national governments think about bitcoins, even more businesses are accepting bitcoin payments from consumers.


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