Bank of England Governor Carney: 'Time Has Come' For Cryptocurrency Crackdown

March 2, 2018

London (Mar 2)  Bank of England Governor Mark Carney said cryptocurrencies were "failing" and urged a global crackdown on the $450 market in order to align them with the broader financial system. Carney, a long-time critic of digital currencies, addressed the question of their ability to replace traditional money during a speech in Edinburgh, Scotland, arguing they were proving to be a poor way to store value and that the average daily volatility of the top 25 cryptocurrencies was 25 times higher than U.S. equity markets and were exhibiting "classic hallmarks" of a bubble.  

"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," he said. "The short answer is they are failing."

"This extreme volatility reflects in part that cryptocurrencies have neither intrinsic value nor any external backing," he said. "Their worth rests on beliefs regarding their future supply and demand-ultimately whether they will be successful as money."

Bitcoins were little changed in Friday trading on the bitstamp exchange in Luxembourg, which feeds prices into the CME Group futures contract, and changing hands at $10,820 each, a move that maintains the world's best-known digital currency's gains to 56% from its early February trough.

Carney, who is also chairs the Financial Stability Board, an international body that monitors and makes recommendations about the global financial system, also said that "the time has come" to bring the crypto-asset ecosystem in line with other markets.

"Being part of the financial system brings enormous privileges, but with them great responsibilities," Carney said. "In my view, holding cryptoasset exchanges to the same rigorous standards as those that trade securities would address a major underlap in the regulatory approach."

Carney's comments followed a report from the Wall Street Journal Thursday that said the U.S. Securities and Exchange Commission had issued subpoenas linked to its probe into so-called initial coin offerings, a process in which companies raise money through the sale of new digital coins, which some studies suggest hit $5.6 billion last year and at least $1.6 billion over the past two months.

"I think our Main Street investors look at these virtual currency platforms and assume they are regulated in the same way that a stock is regulated and, as I said, it's far from that and I think we should address that," SEC chairman Jay Clayton told lawmakers on the Senate Banking Committee on Feb. 6. "Those who engage in semantic gymnastics or elaborate re-structuring exercises in an effort to avoid having a coin be a security are squarely in the crosshairs of our enforcement provision."


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