Bank of England Governor Mark Carney has launched a scathing attack on cryptocurrencies such as Bitcoin and called for regulation to make sure they abide by the ‘same standards as the rest of the financial system’.
In a speech delivered to the inaugural Scottish Economics Conference in Edinburgh, Mr Carney branded cryptocurrencies a failure’ and said they exhibit the ‘classic hallmarks of bubbles’.
He said: “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.
‘At present, crypto-assets raise a host of issues around consumer and investor protection, market integrity, money laundering, terrorism financing, tax evasion, and the circumvention of capital controls and international sanctions.’
His comments come as Bitcoin’s value continues to gyrate wildly, having rocketed to nearly $20,000 late last year before plunging and settling at $10,890 on Friday.
A host of regulators including in South Korea, China, Russia and India have already expressed concern about Bitcoin, while Germany’s Bundesbank has also called for global regulation.
Mr Carney added: ‘A better path would be to regulate elements of the crypto-asset ecosystem to combat illicit activities, promote market integrity, and protect the safety and soundness of the financial system.
‘The time has come to hold the crypto-asset ecosystem 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.’
The Bank’s Financial Policy Committee is carrying out a study into the risks posed to UK financial stability by cryptocurrencies.
However, the Governor insisted that, in his view, crypto-assets do not ‘appear to pose material risks to financial stability’.
The Bank chief also conceded that the distributed ledger technology which underpins cryptocurrencies can act to help the way payments are made evolve.
‘Even if the current generation is not the answer, it is throwing down the gauntlet to the existing payment systems. These must now evolve to meet the demands of fully reliable, real-time, distributed transactions,’ he continued.
“The Bank believes that distributed ledger technology could over time significantly improve the accuracy, efficiency and security of processes across payments, clearing and settlement,’ he said.