Bank Governor warns on cryptocurrency risks

Carney attacked bitcoin in a speech at the Inaugural Scottish Economics conference

"The most fundamental reason to be sceptical about the longer term value of cryptocurrencies is that it is not clear the extent to which they will ever become effective media of exchange". The prospects that cryptocurrency will replace fiat money are "tenuous at best", he said.

Addressing the worldwide debate, Carney said: "The long, charitable answer is that cryptocurrencies act as money, at best, only for some people and to a limited extent, and even then only in parallel with the traditional currencies of the users".

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

The distributed-ledger technology underlying cryptocurrencies could improve cash settlement in the banking system and other asset transactions, he said. "Over the past five years, the daily standard deviation of bitcoin was ten times that of sterling".

There have been a number of high profile fluctuations in the price of cryptocurrencies over the last six months, most notably in bitcoin where prices fluctuated from a high of $20,000 in December 2017 bottoming out at $8,000 at the end of February. If you'd done the same last September, you'd be ahead by £2,000.

Bitcoin is only one of many cryptocurrencies, but has become a benchmark for the euphoria surrounding the new technology.

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He said: "It has all the hallmarks of a bubble". Carney, who also heads the Financial Stability Board - an worldwide financial regulator - joins a growing number of industry insiders calling for greater oversight of cryptocurrencies. Exchanges in these countries are now required to meet the same set of anti-money laundering and countering of terror financing standards as other financial institutions. But the rules were likely to be introduced on a country-by-country basis before any worldwide push.

"At present, crypto-assets raise a host of issues around consumer and investor protection, market integrity, money laundering, terrorism financing, tax evasion, and the circumvention of capital controls and global sanctions", he said.

Carney talked about the fact that cryptocurrencies aren't actually backed by any guarantee and that the price volatility could lead to serious deflationary issues for the economy.

"The Bank of England's Financial Policy Committee (FPC) is now considering the risks posed to United Kingdom financial stability".

But who knows what Carney will say about Bitcoin next time he gives a speech - aside from everybody?

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