BoE says blockchain is not yet system critical
The BoE has said that blockchain technology is not yet a critical infrastructure in the financial system. But it leaves open the possibility that some blockchains could become so.
In a post on its website published on Wednesday (December 21), the Bank of England (BoE) writes that “Blockchains do not constitute critical financial infrastructure (yet). But they could conceivably become so in the future if crypto-asset activity and its connection to the broader financial system continues to evolve.”
Commenting on September’s Ethereum merger, the BoE raised unanswered questions about the governance of permissionless blockchains.
It said the incident posed a number of operational and technological risks. As such, it asked “what if it had gone wrong? Who would be responsible for, and have the authority to, coordinate a timely solution? [And] who would have been liable/responsible for any financial loss caused to others as a result?”
With these questions in mind, the BoE said that if blockchains such as Ethereum were to become further entrenched in the financial system to the point where they count as critical infrastructure, appropriate regulatory oversight must be arranged.
The last post at the time of comment was made in October by Carolyn Wilkins of the BoE’s Fiscal Policy Committee.
Speaking to an audience at the University College London (UCL) Center for Blockchain Technologies, Wilkins warned of what she called “serious deficiencies in the governance of the crypto ecosystem.”
Pointing out that many crypto projects allow for anonymous voting and follow governance models where larger shareholders hold the most weight, she said accountability and transparency in the way blockchains are governed do not meet the more regulated standards used elsewhere.
As a potential way out of the predicament that does not excessively distort the decentralized nature of existing decision-making models in the cryptosphere, Wilkins pointed to the way in which otherwise broadly decentralized governance systems used by Polkadot and MakerDAO retain emergency powers held by assigned technical committees.
In addition to solving the challenge of finding consensus among a distributed swarm of token holders, delegation of certain powers to specific committees solves some of the accountability issues raised by the BoE.
For all PYMNTS EMEA coverage, subscribe to the daily EMEA Newsletter.
How consumers pay online with stored credentials
Convenience prompts some consumers to store their payment information with merchants, while security concerns give other customers pause. For “How We Pay Digitally: Stored Credentials Edition,” a collaboration with Amazon Web Services, PYMNTS surveyed 2,102 U.S. consumers to analyze the consumer dilemma and reveal how merchants can win over holdouts.
