Bitcoin’s Risks to Financial Stability Don’t Worry Mark Carney

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Mark Carney isn’t worried about the financial stability risks of bitcoin. He and his colleagues at the Bank of England are more interested in how it works.

Responding to questions from lawmakers in London on Wednesday, the BOE governor said that the recent price moves are “remarkable” and said the cryptocurrency actually behaves more like an equity. However, he stopped short of joining European Union’s financial-services chief Valdis Dombrovskis, who on Wednesday issued the starkest warning yet in saying that investors risk losing everything.

For the Carney, the systems underlying cryptocurrencies are an “active area of interest” and work undertaken by the central bank’s financial technology accelerator shows the potential value of distributive ledger technology on a systemic level.

“You get those benefits by stopping at a level much higher than the retail level. You don’t end up with those financial stability risks, you get financial stability benefits. And you save huge amounts of computational energy intensity.”

Even so, the BOE is in no rush to embrace any new technology. Carney described the central bank “pretty active in it but we’re also disciplined. If we’re going to apply something to the core of the system, it’s going to need to meet five sigma quality rating.”

But the governor also warned that his own comments on such a fast-evolving technology shouldn’t be given too much weight.

“What I say on this topic today will be outdated six months from now because things are moving so rapidly.”

— With assistance by Zoe Schneeweiss



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