As reported earlier today, Mark Carney, the Governor of the Bank of England, delivered a speech today address the rise of cryptocurrencies and the future of money. "Presently cryptocurrency assets have raised many issues around customer and investor protection, money laundering, market integrity, tax evasion, terrorist financing and in general the circumvention of capital controls and also global sanctions".
Mr Carney said that, in his view, cryptocurrencies do not now pose risks to financial security due to the small size of the market relative to the wider system.
He cited moves to bring cryptocurrency exchanges within the scope of anti money laundering (AML) rules in the European Union and USA as an example of the regulatory approach being taken in some jurisdictions, and further backed the treatment of "crypto-assets" as securities. But the volatility in its price that saw it hit a high above $19,000 past year and crash back below $6,000 in February, has prompted many to call it a bubble, including Carney.
"Currently, no major high street or online retailer accepts Bitcoin as payment in the United Kingdom, and only a handful of the top 500 U.S. online retailers do".
Governments around the world, notably China, have already moved to clampdown on cryptocurrencies, with some banning it outright.
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The Bank will present a report to the G20 in Argentina later this month, with Carney hinting at greater controls and also revealing that the central bank had tested ways to use cryptocurrency technologies at the core of the British payments system.
Carney said, in his view: "crypto-assets do not appear to pose material risks to financial stability". They are small now but they are getting bigger. "In comparison, at the height of the dotcom mania, the valuation of technology stocks were a third of global GDP".
"The time has come to hold the crypto-asset ecosystem to the same standards as the rest of the financial system".
While, Carney acknowledged the potential value of blockchain, the underlying technology of most cryptocurrencies, he said that the digital cons themselves have failed as a form of money. Carney said the central bank would continue to study the use of distributed ledger technology which underlies cryptocurrencies.
He added it could "transform everything from how people manage of their interactions with public agencies, including their tax and medical records, through to how businesses manage their supply chains".
The comments come soon after a warning from the country's top financial regulator on the risks of cryptocurrency investment.