and ones on some distant electronic machine, well that ’ s long been the case. and if the word “ currency ” indicates an alternative unit of account – the “ bitcoin ”, for example – nor is this likely to be of enduring significance. you can find goods and services quoted in bitcoin. in the united states, at a rough guess, there may have been as much as $ 5bn worth of such transactions last year2. but in a country where annual consumer spending is twelve and a half trillion dollars, that ’ s a negligible proportion of the total. in the opinion of most i ’ m thinking here of things like direct debits, or the capacity to receive our monthly pay. according to coinbase, around 20 % of bitcoin transactions – worth $ 25bn in total – were for retail purposes. bis central bankers ’ speeches economists, it ’ s pretty unlikely that its use as a means of exchange will become very widespread. it ’ s not just that the value of bitcoin is extremely volatile, though that ’ s certainly been the case ( chart 2 ; see also ali et al ( 2014a and 2014b ) and yermack ( 2013 ) for the shortcomings of bitcoin as a useable money ). one should also recognise that established currencies have a significant built - in advantage. rather like a common language, the benefit to any individual of using a particular unit of account is greater if others use it too. that gives a big head - start to the incumbent. switches do very occasionally happen : degrade a currency sufficiently, via hyperinflation and collapse of the banking system, and people will eventually look for alternatives. but that ’ s generally the sort of thing that has to happen : almost always, these currency substitutions occur only once the existing currency has become deeply compromised3. even then, the thing people naturally reach for is an existing, trusted currency – often the us dollar – rather than some entirely new unit of account. so if it ’ s neither the “ digital ” nor the “ currency ” aspect of bitcoin that matters, what is it that has sparked so much interest? well perhaps a better name for what we ’ re talking about, albeit more of a mouthful, is a “ decentralised virtual clearinghouse and asset register ”. as the quarterly bulletin articles explain, the key innovation in bitcoin is its settlement mechanism. instead of relying on an independent third

the building blocks of resilience - speech by sarah breeden given at westminster business forum policy conference published on 16 june 2023 following the financial policy committee's recommendations, sarah breeden sets out the steps being taken to build resilience within liability driven investment funds. she then looks at other vulnerabilities within non - bank financial institutions and how the ldi framework could be applied to build resilience within these firms. speech pension funds have an enormous responsibility in ensuring that pension obligations are honoured while also playing a vital role in facilitating the flow of savings into investment, including funding productive finance [ 1 ] and climate resilience. [ 2 ] and they are key players in the gilt market which is vital to the functioning of sterling financial markets more broadly. on all these grounds, pension fund resilience is a key financial stability issue, which will be the topic of my speech today. i suspect i don ’ t need to remind this audience of what happened last autumn. you will all remember how poorly managed leverage [ 3 ] at some liability - driven investment ( ldi ) funds [ 4 ] amplified a sudden repricing of assets following the government ’ s growth plan, creating a self - reinforcing price spiral in the long - end of the gilt market. the bank of england ( bank ) then undertook a targeted intervention in the gilt market in order to deliver our financial stability objective, buying time for ldi funds to build their resilience. even that brief reminder may have been enough to send hearts racing. i won ’ t use any more of this speech today to look backwards. for those that do want to dig deeper, i ’ d like to briefly plug a speech by my colleague jon hall, which will cover the risks of leverage including in ldis next week. what i ’ d like to do instead is explain what the financial policy committee ( fpc ) is doing to build steady state resilience in ldi funds and what needs to be done by pension funds to ensure risks to financial stability are reduced. then i ’ ll look forwards to how the fpc might use this framework for steady state resilience in ldi funds to build resilience throughout the system of market - based finance [ 6 ] in the future. how are we building resilience in ldi funds? as this audience will know, the fpc does not have specific regulatory responsibility for pension schemes or ldi funds. however, the f