Bank of England weighs in on cryptocurrency debate

Chancellor Philip Hammond also backed calls for reform warning that the world needs to'be cautious about Bitcoin

Cryptocurrencies are failing as a form of money and have shown classic signs of being a financial bubble, requiring regulators to protect consumers and stop their use for illegal activities, Bank of England Governor Mark Carney said today. Other governments and central banks - including those which have heavily regulated or even banned cryptocurrencies - also look upon the blockchain technology favorably, as it has many innovative applications outside the digital currency world.

Carney expressed doubts about cryptocurrencies earlier this year.

"The time has come to hold the crypto-asset ecosystem to the same standards as the rest of the financial system", he added.

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

Mentioning that "some of the underlying technologies are exciting", Carney said that this might lead to a better financial stability, reliable and efficient payment services.

The Bank of England governor has poured cold water over cryptocurrencies like bitcoin and their ability to revolutionise the future of money - saying the greater treasure is to be found in the underlying technology. "Anarchy may reign on the dark web, but in the United Kingdom it's just a song that your parents used to listen to", Carney said, in a speech which will be seen as a major intervention by a top global regulator.

If central banks issued their own digital currencies, Carney said they risked creating a much greater role for themselves, "disintermediating commercial banks in normal times and running the risk of destabilizing flights to quality in times of stress".

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.

"In my view, holding crypto-asset exchanges to the same rigorous standards as those that trade securities would address a major underlap in the regulatory approach".

He also said cryptocurrencies should be regulated to protect the UK's financial system, while also calling on authorities and law enforcement agencies to tackle the use of digital currencies in crime, such as "money laundering and terrorist financing". They now operate in murky legal territory and previous year led SEC Chairman Jay Clayton to warn investors that "tales of fortunes" spun by companies may not always be true.

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