Mark Carney calls for regulation of 'failing' cryptocurrencies

Mark Carney calls for regulation of 'failing' cryptocurrencies

In a speech about the future of money the Governor of the Bank of England, Mark Carney, made remarks on the large number of issues that are inherent to the current cryptocurrency market.

Bitcoin hit nearly $20,000 (£14,500) in value in the run-up to Christmas, before crashing by more than half earlier this year, although it has since recovered to nearly $11,000.

An Ernst & Young report released in December 2017 highlighted the concern about criminality in the cryptocurrency market.

Facebook banned adverts for cryptocurrencies last month and Carney said on Friday that younger investors, who typically invested in them, were probably less aware of the bubbles in markets that led to the 2007-09 financial crisis.

He said financial stability risks would only rise if retail participation significantly increased or linkages with the formal financial sector grew without material improvements in market integrity, anti-money laundering standards and cyber defences.

When I asked him whether we will see cryptocurrencies being regulated, he answered: "You will - they will be regulated in my view".

He did not call for a ban, saying cryptocurrencies did not pose a risk to the financial system and instead they should be brought into the net of regulation.

Instead, he specifically mentioned the need "to hold the crypto-asset ecosystem to the same standards as the rest of the financial system".

Authorities in both the USA and European Union have instituted plans to apply anti-money laundering standards and anti-terrorism financing standards to cryptocurrencies in the same way that they do to other financial services products and it now looks like their counterparts in the United Kingdom are to follow suit.

The inquiry will examine the potential impact of the technology on financial institutions and infrastructure, and how regulation can provide protection for consumers and businesses without "stifling innovation".

Carney addressed the 2018 Scottish Economics Conference in London.

But Mr Carney said the blockchain technology that has been developed in parallel with new currencies was "exciting and interesting".

The comments come soon after a warning from the country's top financial regulator on the risks of cryptocurrency investment.

Threadneedle Street has been studying the risks posed to United Kingdom financial stability by bitcoin and other digital currencies, as well as the potential uses of the technology underlying them, for several years.

"This is the next stage in bringing cryptocurrencies and blockchain within the regulatory framework, speeding up the march towards legitimisation of an asset class that, until a few years ago, many law many enforcement agencies, believed had limited legitimate reasons for people to use".