Bank of England Chief: Bitcoin Isn't a Threat to Financial Stability

NEWS
Sujha Sundararajan
Dec 21, 2017 at 10:15 UTC

Bank of England (BoE) head Mark Carney said on Wednesday that bitcoin's meteoric price gains do not pose a threat to global financial stability.

Talking to British lawmakers in Parliament, Carney said that bitcoin's recent price moves are "significant" and more like an "equity-type risk," Reuters reports.

He stated that:

"At present, we don't view [bitcoin] as a financial stability issue."

Bitcoin is the number one cryptocurrency by market valuation, and recently reached an all-time high of around $20,000. At press time, it was trading at just over $16,700.

Carney, who also acts as chair of the G20's Financial Stability Board – a group of central banks and finance ministers that is also conducting its own blockchain research – further said that the idea of central bank-issued digital currency that can be used by the public has "some fundamental problems" unless there is a restriction in the amount that people can hold.

The BoE governor further noted, though, that he is "interested" in the distributed ledger technology (DLT) and that the central bank's own FinTech accelerator shows DLT's potential. According to a Bloomberg report, he added that the BoE is "active" in DLT, but is in no hurry to apply it to the core of the banking system, as any new technology has to satisfy a "five sigma quality rating."

Carney has been commenting blockchain since the start of the year, when he said DLT has the potential to "fundamentally reshape banking including by sharply increasing liquidity risk for traditional banks."

The official's statements come as global central banks are increasingly active in their work with blockchain and DLT.

The BoE has said that a forthcoming version of its real-time gross settlement (RTGS) system – which settles around £500 billion daily – will be compatible with distributed ledger technology. Meanwhile, monetary authorities in Canada, China and Russia, among others, have all expressed interest in a central bank-issued digital currency.

Mark Carney image via Shutterstock

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Bank of EnglandMark Carney