Bank of England's Carney steps up attack on cryptocurrencies

Posted March 03, 2018

Further, the central bank chief said he doesn't believe cryptocurrencies now pose significant risks to the existing financial system.

Carney went on to clarify that cryptocurrencies don't pose risks to financial security yet owing to the small size of the market. It is likely that the great success but finite nature of Bitcoin has spurred others to try to snag a portion of the market in various different ways, just to get on the virtual currency (VC) bandwagon before the oft-prophesized bubble burst occurs.

An Ernst & Young report released in December 2017 highlighted the concern about criminality in the cryptocurrency market.

Carney admitted there were uses for the technology underlying cryptocurrencies.

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Bank of England governor Mark Carney laid down the law today with a withering assessment of Bitcoin's qualifications to be described as money and a warning that, if allowed to grow unchecked, it could threaten financial stability. But they needed to be regulated in a similar way to other parts of the financial system, and could not replace traditional currencies.

He says the time has come to hold the crypto markets to the same standards as the rest of the financial system.

Although he was very critical of cryptocurrencies, he described the blockchain technology they use as "exciting and interesting".

If central banks issued their own digital currencies, Carney said they risked creating a much greater role for themselves, "disintermediating commercial banks in normal times and running the risk of destabilizing flights to quality in times of stress".

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He said the use of digital money raised "a host of issues around consumer and investor protection, market integrity, money laundering, terrorism financing, tax evasion, and the circumvention of capital controls and worldwide sanctions".

Carney, who heads the Financial Stability Board, a global financial rule-making body, expressed doubts about cryptocurrencies earlier this year and his speech for a Scottish student economics conference expanded on these.

"In his closing remarks, Carney said that the, ". core technology is already having an impact".

This week, the European Union's financial services chief said Brussels was ready to regulate cryptocurrencies if risks from the sector are not tackled at the global level.

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Threadneedle Street has been studying the risks posed to United Kingdom financial stability by bitcoin and other digital currencies, as well as the potential uses of the technology underlying them, for several years.