Earlier this week Bill Gates warned of the ‘deadly’ impact of cryptocurrencies, today, the Bank of England governor has called for them to be regulated.
Bank of England governor Mark Carney said that the “time has come to hold the crypto-asset ecosystem to the same standards as the rest of the financial system.”
Whilst admitting that cryptocurrencies do not currently pose a risk to financial stability, he said that could change should more people began investing in them.
Instead of taking the approach of banning cryptocurrencies, Carney believes that a regulatory framework could work better.
Carney said: “A better path would be to regulate elements of the crypto-asset ecosystem to combat illicit activities, promote market integrity, and protect the safety and soundness of the financial system.”
China, Indonesia, Bangladesh, have all taken hard line approaches to cryptocurrencies, either banning or shutting down Bitcoin exchanges, initial coin offerings, or the use of Bitcoin as a payment tool.
Jo Torode, a senior financial crime lawyer at Ropes & Gray, said: “The key to successful regulation of cryptocurrencies is to ensure that regulation does not stifle innovation. Appropriate regulation would for the first time offer legal and regulatory protection to individual investors and high street customers seeking to benefit from the opportunities presented by cryptocurrencies, and the underlying blockchain technology.”
Whilst plenty of concern is present regarding this tech advancement, Carney does see that they “could potentially catalyse innovations to serve the public better.” That really is the great hope of cryptocurrencies, that they can operate more efficiently, effectively and in a more reliable manner than traditional systems.
“Appropriate and thoughtful regulation will facilitate the better exploration of the opportunities that blockchain – the technology underlying cryptocurrencies – offers to the financial services and technology sectors in London, in particular the thriving London fintech market, particularly post-Brexit,” said Torode.
A spokesperson for CryptoUK, the UK’s first self-regulatory trade body for the cryptocurrency industry, said: “We support the Governor’s principle on the benefit of regulation. This shouldn’t be viewed as a crackdown, but an opportunity to establish parameters that protect consumers while encouraging the biggest and best cryptocurrency businesses to make the UK their home.
“It is hugely important that policy makers and the Bank of England do not simply try to retrofit existing financial regulation onto this industry. Instead we need close dialogue with regulators over the coming weeks and months to develop a new framework and seize the opportunities that this sector can offer.
“The UK has an exciting opportunity to become a world leader within the crypto economy and to attract new talent, particularly in a post-Brexit climate. Now more than ever is the time to show that our financial markets invite financial innovation through a regulated framework.”