Bank of England’s Carney Wants Action on Cryptocurrencies

CBJ — Former Bank of Canada Governor and current Bank of England Governor Mark Carney has launched an attack on cryptocurrencies such as bitcoin, urging regulators around the world to monitor them in the same way as other financial assets.

In a speech to the Scottish Economics conference in Edinburgh, Carney laid into the “global speculative mania” that has fueled the ascent of cryptocurrencies and said they should be held 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,” Carney said.

Bitcoin, whose birth nearly a decade ago is clouded in mystery, is the world’s most popular virtual currency. Like others, it can be converted to cash when deposited into accounts at prices set in online trading. It has made some people very rich and many others don’t really understand why, when much of it is based on speculation of what is to come in the future.

A major obstacle as of now is that these types of digital currencies are not tied to any bank or government and, like cash, allow users to spend and receive money anonymously, or mostly so. But it’s not worth anything if not endorsed by proper authorities, including governments and banks.

Supporters say they can be more trustworthy than traditional money, which can be vulnerable to the whims of those in power. Cryptocurrencies are popular in countries with weak institutions and unstable currencies, such as Zimbabwe. They don’t seem to be gaining the same type of traction in more established economic nations. Taxation would also be a huge nightmare for governments.

“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,” Carney said.Carney’s comments follow a warning this week from Agustin Carstens, the general manager of the Bank for International Settlements — an international organization for central banks — that bitcoin “has become a combination of a bubble, a Ponzi scheme and an environmental disaster.”