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Bank of England sees Bitcoin fraud risk, deflation danger

11
Sep
2014

By David Milliken LONDON (Reuters) – Bitcoin and similar digital currencies may be at increasing risk of fraud and could damage Britains economy if they find widespread use, the Bank of England said on Thursday. The BoE said the finite supply of Bitcoins – which are traded between users outside the banking system, and used to buy goods ranging from pizzas to PCs – meant that an economy where they formed the main currency would be at risk of deflation. Unpredictable exchange rates and the prospect of rising transaction costs might limit the widespread adoption of Bitcoin and similar currencies, but a more fundamental problem was the fixed supply, the BoE said. The inability of the money supply to vary in response to demand would likely cause greater volatility in prices and real activity, the BoE said.

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