Mark Carney shared his thoughts on the regulation of cryptocurrencies and ICOs, and sees promise in blockchain technology.
On March 2, 2018, Mark Carney, governor of the Bank of England, addressed the issue of cryptocurrencies and the greater financial ecosystem into which the burgeoning asset class fits.
“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,” said Carney.
Carney also warned that companies engaging in ICOs “will not be allowed to use semantics to avoid securities laws designed to protect investors.”
Carney’s speech touched on several points that have become somewhat of a mainstay for banking officials. He warned of “a host of issues” related to cryptocurrencies that include “consumer investor protection, market integrity, money laundering, terrorism financing, tax evasion, and the circumvention of capital controls and international sanctions.” Another major concern Carney highlighted is the massive volatility in cryptocurrency marketplaces.
However, given these risk factors, Carney said he doesn’t believe cryptocurrencies are a threat to the stability of the existing financial system.
“In part,” he elaborated, “this is because they’re small relative to the financial system. Even at their recent peak, their combined global market capitalization was less than one percent of global GDP. In comparison, at the height of the dotcom mania, the valuation of technology stocks were a third of global GDP.”
While regulators are exploring their options, Carney said that officials in charge of oversight for the marketplace are at a crossroads. “Authorities need to make some decisions,” he explained. “They need to decide whether to isolate, to regulate, or to integrate crypto-assets into the financial system.”
He went on to acknowledge the necessity to avoid dismissing cryptocurrencies, because an outright prohibition might quash technological breakthroughs that would otherwise be realized by blockchain systems.
“If [cryptocurrencies are] widely adopted … isolation risks foregoing potentially major opportunities from the development of the underlying technologies. A better path, I’d suggest, would be to regulate elements of the cryptocurrency ecosystem to combat those illicit activities, promote market integrity and protect the safety and soundness of the financial system.”
Rather than simply ban them, Carney expressed that it is now time “to hold the crypto-asset ecosystem to the same standard as the rest of the financial system.” Doing so “brings enormous privileges, but also great responsibilities,” said Carney, “and in this spirit, the EU and the US are requiring crypto-asset exchanges to meet the same anti-money laundering standards and counter-terrorism standards as other financial institutions.”
Carney finished his speech with a balanced assessment:
“For many reasons, in my view, the crypto-assets in your digital wallets are unlikely to be the future of money. But that isn’t meant to dismiss them; their core technology is already having a major impact. And bringing crypto-assets into the regulatory tent could potentially catalyze innovations to better serve the public.”
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