Mark Carney calls for regulation of 'failing' cryptocurrencies

03 March, 2018, 05:00 | Author: Regina Lloyd
  • Chancellor Philip Hammond also backed calls for reform warning that the world needs to'be cautious about Bitcoin

Still, the answer isn't to isolate or outlaw digital currencies, he said.

"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".

Of course, Bitcoin largely came about because Carney's financial system wasn't particularly "safe and sound" - at least, not for all those who lost their homes and jobs during the 2008 Financial Crisis, which ultimately saw many traditional financial institutions rewarded for actually failing. European Central Bank board member Yves Mersch said last month that the market is held up by investors who "believe they will find a greater fool to sell to before the inevitable crash".

Carney also slammed the ability for cryptocurrencies to fulfil the role of money, saying they are "failing" as a medium of exchange and are "proving poor short-term stores of value".

And far from being strengths, the fixed supply rules of cryptocurrencies are serious deficiencies that would impart a deflationary bias on the economy.

Companies use ICOs, which is a combination of crowdfunding and cryptocurrencies, to raise money by offering investors a digital token in exchange for money. They now operate in murky legal territory and past year led SEC Chairman Jay Clayton to warn investors that "tales of fortunes" spun by companies may not always be true.

Cryptocurrencies also fail as a medium of exchange, Carney said. "The decentralized and now unregulated nature of the beast means cryptocurrency trades circumvent the banking industry".




The evangelists of crypto-currencies will dismiss Mr Carney's assessment as the predictable response of a financial establishment that Bitcoin threatens. Known as the blockchain, this is essentially a digital ledger of all transactions that can not be tampered with or altered.

What do you think of Carney's speech to Bloomberg?

"Some of the underlying technologies are exciting", he stated.

"Authorities should be careful not to stifle innovations which could in the future improve financial stability; support more innovative, efficient and reliable payment services as well as have wider applications", he said.

There have been a number of high profile fluctuations in the price of cryptocurrencies over the last six months, most notably in bitcoin where prices fluctuated from a high of $20,000 in December 2017 bottoming out at $8,000 at the end of February.

Carney said that bitcoin and other cryptocurrencies are "failing" in their key objectives and called for regulation of the space.

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