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Central bank cryptocurrencies a bad idea, says BoE's Carney


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Central bank cryptocurrencies a bad idea, says BoE's Carney

Bitcoin does not yet pose a financial stability risk, despite the total value of the world's most popular digital currency ballooning to nearly $300 billion this year, Bank of England Governor Mark Carney has told U.K. lawmakers.

"It's significant ... but it's more like an equity-type risk that's spread fairly widely around the world," Carney told the Treasury Select Committee on Dec. 20.

Carney's comments join a chorus of warnings from central bankers about Bitcoin and other cryptocurrencies. Bitcoin has dropped below $17,000 after threatening to break through the $20,000 barrier for the first time earlier this month, but it is still up around 1,600% over the course of 2017.

In 2017, 234 initial coin offerings — issuance of tokens against cryptocurrency — were made, raising a total of $3.7 billion, according to data from Coinschedule.

The governor said there was a need for tighter rules around ICOs.

He also expressed his discomfort with the idea of cryptocurrency being issued by the central bank for public use, citing "fundamental problems."

Carney said the blockchain technology used by digital currencies could benefit the process of transactions among financial institutions but would pose financial stability risks if rolled out to the general public.

Blockchain uses a shared ledger to verify and settle transactions between parties directly without the need for a central intermediary, but Carney said that would enable consumers holding central bank-issued cryptocurrency to open accounts at any bank, including the central bank.

That raises the possibility of an "instantaneous" bank run, he said.

"So as soon as there were any concern, people can switch in their account at the Bank of England."