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A Bitcoin-Style Currency For Central Banks

By Technology Review

March 14, 2016

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Virtual currency could become more viable thanks to RSCoin, a new Bitcoin-like system controlled by a central bank developed by University College London (UCL) researchers at the behest of the Bank of England.

RSCoin employs cryptography to create a form of counterfeit-resistant digital cash, while transactions are confirmed with their movements recorded in a digital ledger. However, RSCoin diverges from Bitcoin in that its ledger is overseen by the central bank, which also would hold a special encryption key that could be used to regulate the money supply. The central bank would select a small group of third-party organizations to process new transactions and submit them for inclusion in the central ledger.

UCL's Sarah Meiklejohn says it would make sense for large commercial banks to fulfill that role, as RSCoin's centralized design enables it to manage very large transaction volumes.

University of California, Los Angeles professor Bhagwan Chowdhry says a system such as RSCoin could enhance commerce and greatly broaden the availability of basic financial services worldwide.

"Most consumers would adopt [a centralized solution] because they would perceive it to be safe and familiar," he says. A virtual currency also would be very appealing to a central bank because the ledger offers a fine-grained record of financial activity.

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