Bank of England chief slams cryptocurrencies

Published March 3, 2018
London: The BoE Governor, Mark Carney, speaking to the Scottish Economics Forum, via a live feed in central London on Friday.—Reuters
London: The BoE Governor, Mark Carney, speaking to the Scottish Economics Forum, via a live feed in central London on Friday.—Reuters

LONDON: Bank of Eng­land Governor Mark Carney has launched a withering attack on cryptocurrencies such as bitcoin Friday and urged regulators around the world to monitor them in the same way as other financial assets.

In a speech to the Scottish Economics conference in Edinburgh, Carney laid into the “global speculative ma­­nia” that has fueled the ascent of cryptocurrencies and said they should be held to the “same standards” as the rest of the financial system.

“Being part of the financial system brings enormous privileges, but with them great responsibilities,” Car­ney said.

Bitcoin, whose birth nearly a decade ago is clouded in mystery, is the world’s most popular virtual currency. Like others, it can be converted to cash when deposited into accounts at prices set in online trading.

It also has been hugely volatile, posting some dizzying intra-day rises and falls over the past year or so. The price of a single bitcoin rocketed to nearly $20,000 late last year and then plunged early this year.

On Friday, after Carney’s comments, it was trading just below the $11,000 mark.

Digital currencies are not tied to any bank or government and, like cash, allow users to spend and receive money anonymously, or mostly so.

Supporters say they can be more trustworthy than traditional money, which can be vulnerable to the whims of those in power.

Cryptocurrencies are popular in countries with weak institutions and unstable currencies, such as Zimbabwe.

However, financial market participants are becoming increasingly vexed by virtual currencies and their potential to promote illicit activities and their potential to introduce a layer of uncertainty.

Some market participants even think that the volatility around bitcoin contributed to the turmoil that gripped financial markets in February.

For Carney, they are “failing,” not least because they are proving to be poor stores of value.

“The prices of many cryptocurrencies have exhibited the classic hallmarks of bubbles, including new paradigm justifications, broadening retail enthusiasm and extrapolative price expectations, reliant in part on finding the greater fool,” Carney said.

He listed a series of concerns, including money laundering, terrorism financing and tax evasion.

The Bank of England’s Financial Policy Committee, which monitors risks in financial markets, is currently carrying out a study into the risks posed to UK financial stability by cryptocurrencies.

On the international front, the Financial Stability Board will be reporting to the Group of 20 leading industrial and developing nations in Argentina this month on the financial stability implications of crypto-assets.

For now, Carney said that in his view “crypto-assets do not appear to pose material risks to financial stability.”

Carney’s comments follow a warning this week from Agustin Carstens, the general manager of the Bank for International Settlements an international organisation for central banks that bitcoin “has become a combination of a bubble, a Ponzi scheme and an environmental disaster”.

Published in Dawn, March 3rd, 2018

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Judiciary’s SOS
Updated 28 Mar, 2024

Judiciary’s SOS

The ball is now in CJP Isa’s court, and he will feel pressure to take action.
Data protection
28 Mar, 2024

Data protection

WHAT do we want? Data protection laws. When do we want them? Immediately. Without delay, if we are to prevent ...
Selling humans
28 Mar, 2024

Selling humans

HUMAN traders feed off economic distress; they peddle promises of a better life to the impoverished who, mired in...
New terror wave
Updated 27 Mar, 2024

New terror wave

The time has come for decisive government action against militancy.
Development costs
27 Mar, 2024

Development costs

A HEFTY escalation of 30pc in the cost of ongoing federal development schemes is one of the many decisions where the...
Aitchison controversy
Updated 27 Mar, 2024

Aitchison controversy

It is hoped that higher authorities realise that politics and nepotism have no place in schools.