Bank of England governor Mark Carney has reportedly called for Cryptocurrencies to be regulated.
Speaking at the inaugural Scottish Economics Conference, Carney said that the currencies themselves could present a future risk to financial stability and called for them to be more rigorously regulated.
He said, “The time has come to hold the crypto-asset ecosystem to the same standards as the rest of the financial system. Being part of the financial system brings enormous privileges, but with them great responsibilities.
While Cryptocurrencies do not currently pose risks to financial stability, Carney said that could change if more people began investing in them.
A few jurisdictions have banned crypto-assets outright and some regulators have sealed off crypto-assets from the core of the financial system in order to curtail risk of contagion. Most prominently, China recently banned exchanges, financial institutions and payment processors from handling them.
However, Carney believes that regulation would be a better approach than an outright ban. “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,” he added. “Bringing crypto-assets onto a level regulatory playing field could also catalyse private innovation to create a more resilient, effective payments system.”
According to Carney, Cryptocurrencies are failing and are proving poor short-term stores of value.
Over the past five years, the daily standard deviation of Bitcoin was ten times that of sterling. If someone had taken out a £1,000 student loan in Bitcoin in last December to pay sterling living costs for next year, they would be short about £500 right now. However, if someone did the same last September, this would have resulted in a £2,000 increase/
“That’s quite a lottery. And Bitcoin is one of the more stable cryptocurrencies. 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.
“This extreme volatility reflects in part that cryptocurrencies have neither intrinsic value nor any external backing. Their worth rests on beliefs regarding their future supply and demand—ultimately whether they will be successful as money.”
Earlier this month, the European Union warned that it will regulate cryptocurrencies if an effort is not made to tackle risk. Valdis Dombrovskis, the EU’s financial chief, said that worldwide measures were needed if European regulation was to be avoided.
However, South Korea’s financial regulator recently softened its stance on cryptocurrency trading, weeks after mulling a ban. Choe Heung-sik, governor of the Financial Supervisory Service, said the government will support ‘normal transactions’ of cryptocurrencies according to Yonhap News.
Copyright © 2018 RegTech Analyst
Copyright © 2018 RegTech Analyst
