The Governor of the Bank of England (BoE), Mark Carney, has called for cryptocurrency regulation before “crypto-mania” causes serious damage to the financial system.
Speaking on Friday at Edinburgh University’s inaugural Scottish Economic Conference, Carney said that the inherent risks associated with cryptocurrency meant that government had to crack down on illegal activity as well as maintain the existing financial system so that people avoided losing all of their investments:
“The time has come to hold the crypto-asset ecosystem to the same standards as the rest of the financial system,”
He also said that at present, cryptocurrencies didn’t pose a risk to the financial system, but if the rate of investment continued then it might have serious repercussions for the global economy because of the market’s volatility, which he claimed was 25 times that of the US equities market in 2017.
Carney talked about the fact that cryptocurrencies aren’t actually backed by any guarantee and that the price volatility could lead to serious deflationary issues for the economy. He also suggested that the high transaction fees for Proof of Work (PoS) systems, as well as the high energy cost, meant that at present, big mineable cryptocurrencies, such as Bitcoin did not present a viable alternative to the current card-based system.
That said, the Governor did consider that “crypto-assets” had potential which should not be written off by too strict regulation. Although countries like China have banned ICOs and access to cryptocurrency exchanges, Carney argues that there is potential in the technology as peer-to-peer transactions “could potentially catalyse innovations to serve the public better.”
In early February, the deputy Prime Minister of Singapore also said there was a very limited case for an outright ban on cryptocurrencies or exchanges and that they have no plans to impose one at present.
Photo Credit: Bank of England.
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