Bitcoin poses potential risk to financial stability, warns Bank of England

The Bank believes rising transaction fees and the bitcoin’s finite supply provide barriers to the widespread adoption of the digital currency

Bitcoin (Getty Images)

Widespread use of digital currencies like the bitcoin could eventually pose risks to financial stability, the Bank of England warned today.

Research from the Bank suggested only 20,000 people in the UK hold bitcoins and that it is used in as few as 300 transactions a day.

The Bank believes rising transaction fees and the bitcoin’s finite supply provide barriers to the widespread adoption of the digital currency, first created in 2008.

It is estimated there is less than £60 million worth of bitcoins circulating within the UK economy, representing less than 0.1 per cent of sterling notes and coins.

But the much-hyped bitcoin has seen huge fluctuations in price during its short life, reaching a peak of $1242.

The Bank said: “The total stock of digital currencies is at present too small to pose a threat to financial stability, but further increases cannot be ruled out and it is conceivable in time that there could be an asset price crash among free-floating digital currencies that had the potential to affect financial stability.”