Governor of the Bank of England attacks cryptocurrencies
In a speech in Edinburgh, Scotland, the former governor of the Bank of Canada attacked the "global speculative madness" that fueled the recent surge of cryptocurrencies. He said they should be subject to the "same standards" as the rest of the financial system. Being part of the financial system brings huge benefits, said Carney, but it also imposes great responsibilities.
Bitcoin is the most popular cryptocurrency in the world. The value of a single bitcoin rose last year from about US $ 1,000 to nearly US $ 20,000; it was about US $ 11,000 Friday after Carney's speech.
Mr. Carney believes that cryptocurrencies are doomed to fail, since the value of many of them gives classic signs of speculative bubble. It recalls that they can also be used for money laundering, terrorist financing and tax evasion purposes.
The Financial Stability Board will soon report to the G20 on the impact of cryptocurrencies on financial stability. The boss of the Bank for International Settlements, Agustin Carstens, recently said that bitcoin has become a "combination of speculative bubble, Ponzi scheme and environmental catastrophe."
Cryptocurrencies do not depend on any bank or government; unlike cash, they allow users to spend and cash virtually anonymously. The followers of cryptocurrencies claim that they are more reliable than traditional currencies, whose value may vary according to the policies of the people in power. Cryptocurrencies are popular in countries like Zimbabwe, whose institutions are weak and the currency unstable.
Participants in the financial system are increasingly concerned about the uncertainty associated with cryptocurrencies and the fact that they can be used for illicit activities. Some even believe that the volatility of bitcoin has contributed to the recent turmoil in the financial markets.