Bank of England guv’nor gives cryptocurrencies grief
At today’s (2 March) inaugural Scottish Economics Conference at Edinburgh University, Carney spouted out the usual pro-Adam Smith stuff to woo the Scottish horde.
More importantly, he talked about the future of money, and says: “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. The short answer is they are failing.”
Fair enough. At least he was clear.
In his speech, he goes onto explain that some people may view “paper money – even the Bank of England itself – as archaic vestiges of an old centralised order of payments that will soon be swept aside by a digital, distributed future”.
He doesn’t call for a ban of digital currencies, but the message is that “more than a thousand virtual or ‘crypto’ currencies are trying” to dislodge sterling as legal tender in the UK. Unsurprisingly, BoE doesn’t want its powerbase affected.
Carney says: “In the depths of the global financial crisis, the coincidence of technological developments and collapsing confidence in some banking systems sparked the cryptocurrency revolution. Its advocates claim that a decentralised cryptocurrency, such as Bitcoin, is more trustworthy than centralised fiat money.”
The reasons include a fixed supply and “immune from the age-old temptations of debasement”; its use is free from “risky private banks”; and the allure of anonymity.
He adds: “Some also argue that cryptocurrencies could be more efficient than centralised fiat money because the underlying distributed ledger technology [DLT] cuts out intermediaries like central banks and financial institutions and allows payments to be made directly between payer and payee.”
To counter that argument, Carney reminds people of the bank’s real-time gross settlement (RTGS) service – which “delivers final and risk-free settlement”.
But he does say while “crypto-assets in your digital wallets are unlikely to be the future of money” – “that is not meant to dismiss them”.
Carney says what most of us know: “Their core technology is already having an impact. Bringing cryptoassets into the regulatory tent could potentially catalyse innovations to serve the public better.”
These better things comprise increasing the efficiency of managing data; and enhancing transparency and auditability.
There’s no need to paraphrase his entire speech. You can find it here.
The bottom line from the BoE is it simply saying we are better and more trustworthy than cryptocurrencies.
As in the words of 1980’s TV comedy cop, Sledge Hammer!: “Trust me. I know what I’m doing.”