Bank of England governor Mark Carney has pledged to tighten regulation of cryptocurrency providers and warned of a speculative mania around bitcoin in a speech at the Scottish Economics Conference in Edinburgh.
Addressing the audience by video link, Carney argued that cryptocurrencies are failing to fulfill the role of money because they offered a poor short term store of value. “Indeed, the average volatility of the top ten cryptocurrencies by market capitalisation was more than 25 times that of the US equities market in 2017” he warned.
He also expressed skepticism whether cryptocurrencies would become recognised as effective medium of exchange, with only a limited number of high street retailers accepting the currency.
At the same time, he acknowledged that the blockchain technologies underlying the advent of cryptocurrencies were exciting: “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 argued.
While Carney believes that cryptocurrencies are not currently representing a major risk to financial stability in the UK, due to the limited exposure of financial institutions, he warned that this could change if retail participation increased significantly.
He argued against an outright ban of cryptocurrencies and advocated in favour of making cryptocurrencies compliant with anti-money laundering regulation and counter-terrorism standards instead.
David Merry, CEO of cryptocurrency firm Investoo Group responded to the speech by welcoming Carney’s comments but criticising the connection to illicit activities Carney made: “It’s confusing that he appeared to link cryptocurrency to money laundering and terrorism when the Treasury’s report appeared to be in stark contravention to these claims” he argued.
Baroness Michelle Mone OBE co-founder of EQUI a cryptocurrency-based platform for investment in tech companies, welcomed the demand for regulation: “The simple fact is we need it. Everybody who believes in cryptocurrencies agrees that we need regulation to move forwards, nobody wants this to be the wild west anymore. With regulation comes stability” she stressed.