What is really interesting and potentially useful about cryptocurrencies (beyond the mere intellectual stimulus, of course) is distributed ledger technology and the idea of digital money being issued by mainstream central banks themselves. The two are bound together by a common feature: a reduction of the importance of intermediaries. The distributed ledger technology behind bitcoin brings the attractive notion that, in principle, we don’t need any centralised settlement systems, any standardised systems that settle payments. The settlement system can be decentralised, thus potentially saving time. But let’s not forget how the system of payment confirmation works when distributed ledger technology is in play. Bitcoin makes many users confirm that a transaction has taken place. The process is very energy-demanding, akin to actual mining: it resembles all the processes employed in the past when we were dealing with physical money. Using classical commodity money requires physical investment; using bitcoin requires energy investment. So far it seems that distributed ledger technology would consume much more energy than standardised central clearing houses. That’s why we now use non-physical money without any intrinsic value – it is more efficient. Going back to any physical money would be like going back from PCs to typewriters. Maybe this is one of the reasons I haven’t so far heard of any distributed ledger technology being 2/3  BIS central bankers' speeches  used in the mainstream banking systems of Europe. Many institutions have been investigating the possibility, studying it, researching it, but that’s all.
In the digital age, of course, biting won’t help, and standard counterfeiting doesn’t rank among the many problems that bitcoin faces. Two years ago we held a seminar on cryptocurrencies (and especially bitcoin) at our central bank. When we were preparing for the event, people from the libertarian, cryptocurrency-loving community in Prague asked me: aren’t you afraid of us? Aren’t you afraid of bitcoin and other independent, central-bank-free currencies and their power to marginalise traditional money? I said – well, not really. Let’s put aside the fact that all of these alternative currencies are still marginal in terms of size and scope (all the electronic transactions using bitcoin worldwide combine to some 16% of the number of electronic transactions conducted in the Czech koruna, a currency used by a mere 10.5 million people). Bitcoin’s global market cap also constitutes only a fraction of even the Czech money supply. The key problem is bitcoin’s constantly changing purchasing power. So far it has been more volatile than natural gas, the most volatile commodity. Such a feature is really worrying for any innovation that wants to be seen as money: a means for paying and settling transactions, a unit of account and a store of value. Let’s try to imagine the following: today’s five pound note being worth ten pounds tomorrow and then one pound the day after tomorrow. It would be very difficult to exist in such a monetary system, to use the currency in everyday life.