Bank Governor warns on cryptocurrency risks
In today’s speech, he said that digital currencies need to be held to the same standards as the rest of the financial system, but they didn’t yet pose a risk to financial stability.
However, he added that if more people were to start investing, problems may arise. He favoured regulation rather than an outright ban: “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,” he said.
Other countries, such as China, Indonesia and Bangladesh, have cracked down hard on cryptocurrencies. The South China Morning Post reported that China is to block all websites related to cryptocurrency trading and initial coin offerings (ICOs) – including foreign platforms – in a bid to stamp it out.
Carney admitted there were uses for the technology underlying cryptocurrencies. Blockchain technology could be used to make payments more flexible, efficient and reliable, for example.
He said that cryptocurrencies “have exhibited the classic hallmarks of bubbles”. The price of Bitcoin soared at the end of last year, rising almost six-fold in the last three months of the year. However, it has sold off significantly in 2018 and now sits at around half its value at December last year.
Bitcoin is only one of many cryptocurrencies, but has become a benchmark for the euphoria surrounding the new technology.