Risk of fraud or deflation is a worry, report finds.
Bitcoin could pose a risk to the UK economy if usage of the cryptocurrency grows, according to the Bank of England, which has finally given its verdict on the digital medium of exchange.
Although posing no immediate risk to the country’s financial stability, the bank’s report found that widespread use of digital currencies like Bitcoin in the future could raise issues, not least because of its volatility and fluctuating value.
"The total stock of digital currencies is at present too small to pose a threat to financial stability," the report stated, "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."
The report found that the UK’s current Bitcoin presence is fairly minimal, estimating that only 20,000 people in the country own a bitcoin and that just 300 transactions are made each day.
This equates to around £60m worth of Bitcoin circulating within the British economy, which represents less than 0.1% of sterling notes and coin and only 0.003% of broad money balances.
If cryptocurrenices such as Bitcoin were to take off substantially in Britain, however, this could raise the risk of fraud or deflation, not least due to the limited amount of monetary units available and the attraction to cybercriminals.
The collapse of leading marketplace Mt Gox last year demonstrated the fallibility of Bitcoin, with many customers losing significant amounts as assets were seized.
"Digital currencies do not, at present, play a substantial role as money in society," the institution wrote in the report.
"But they may have the potential to come to exhibit at least some of the functions of money over time."
The bank did state, however, that it believes the technology behind digital currencies could play an important part in developing and reshaping the UK’s financial system in the future.
"Both digital currencies’ status as money and the distributed ledger technology used by them have potential to develop over time," it said.
Bitcoin’s entry into the mainstream was encouraged earlier this week by the news that leading mobile payments provider Braintree is to incorporate the currency into its ecommerce platform, meaning customers of services such as Uber and PayPal could use it to pay for goods in the near future.