A message from Mark Carney, The Governor of the Bank of England
The Governor of the Bank of England, Mark Carney, has come out with a statement in which he warns of the dangers of Cryptocurrencies and advises that regulations should be put in place to control them.
Whilst there is nothing at all wrong with that statement, Cryptocurrencies should indeed be regulated, is there more to this statement that meets the eye?
When you start to read the finer details of Mr Carney’s speech which he delivered to the Scottish Economics conference in Edinburgh, it doesn’t take long to realise that that he was on something of a mission, a mission to dismiss Cryptocurrencies as something which is attracting fools who are easily persuaded to part with their money.
It does seem a slightly bizarre and not to mention, one sided view, but when you take into consideration that the traditional banking system as we know it is basically dependent on Cryptocurrencies failing, it is not surprising that he decided to go on the offensive in his statement.
To quote an extract from his speech:
“The prices of many cryptocurrencies have exhibited the classic hallmarks of bubbles including new paradigm justifications, broadening retail enthusiasm and extrapolative price expectations reliant in part on finding the greater fool”
You can imagine the grinning nods from those in the audience as Mr Carney always chooses to make statements such as this when he is in the company of an audience which will likely share his views.
He went on to talk about the dangers relating to crypto assets such as money laundering, tax evasion, and terrorism financing so it would be fair to say that he tried his best to paint the darkest possible picture of what the future will be like if cryptocurrencies are embraced and become part of our future.
Pretty much on a par with his warning about how the UK would collapse if we voted to leave the European Union, don’t you think?
When you delve a little deeper into Mr Carney’s speech though, he does speak about the potential of smart contracts and how new mechanisms for payment can be created but the negative tone remains throughout.
It would be safe to say that there will be more speeches and statements such as this over the coming months as Mr Carney and other representatives of the Bank of England fight for the very future of the traditional banking system.
As for Mr Carneys view of cryptocurrencies being nothing more than a bubble, when you take into consideration that the first Bitcoin was mined less than 10 years ago, the very fact that the Governor of the Bank of England has dedicated a speech to it, it is evident that it must be a pretty big bubble!
In the view of many commentators, as the world of cryptocurrencies becomes more established, the tone of these naysayers will change and it wouldn’t be at all surprising if the Bank of England didn’t have their own cryptocurrency in the not too distant future.
This realisation could have led to a softening of the tone towards cryptocurrencies as a month later Mark Carney, who is also a member of the Financial Stability Board (FSB), an organisation which coordinates financial regulation for the G20 economies, in a letter to central bankers and finance ministers at their latest summit in Buenos Aires said:
“The FSB’s initial assessment is that crypto-assets do not pose risks to global financial stability at this time.”
The statement would seem they will follow a wait and see policy as they see potential in cryptocurrencies. This is positive news for cryptocurrencies and the financial system as a whole where traditional bank systems can coexist with the newer technologies.