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Mark Carney: Cryptocurrency isn't real money and must be regulated

03 March 2018

Cryptocurrencies are poor stores of value.

The prospects that cryptocurrency will replace fiat money are "tenuous at best", he said.

While the price of bitcoin has fallen significantly from the dramatic highs of previous year, supporters remain bullish.

Bitcoin saw its value go through the roof a year ago - beating the 17th Century dutch Tulip Mania, the South Sea bubble and the dot com bubble of the early 2000s to become the biggest economic bubble in history, according to the Daily Mail.

Virtual currencies based on nothing more than computer code would soon have to adhere to the "same standards as the rest of the financial system", he said, adding: "Being part of the financial system brings enormous privileges, but with them great responsibilities". That's quite a lottery.

"The most fundamental reason to be sceptical about the longer term value of cryptocurrencies is that it is not clear the extent to which they will ever become effective media of exchange", he said.

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Carney continued to state: "In the short run, the fixed supply of Bitcoin has fed a global speculative mania that has encouraged a proliferation of new cryptocurrencies".

"For the established banking community, there's a clear love/hate relationship with bitcoin and cryptocurrencies", Kevin Murcko, CEO of cryptocurrency exchange CoinMetro, told Newsweek.

While regulators are exploring their options, Carney said that officials in charge of oversight for the marketplace are at a crossroads. "For those who can find someone willing to accept payment for goods and services in cryptocurrencies, the speed and cost of the transaction varies but it is generally slower and more expensive than payments in sterling". Bitcoin rose above $19,000 per coin last December, only to plummet to about $11,000 as of this month. Carney stressed in his speech that he holds no grudge towards innovation.

During 2017, HM Treasury and the Home Office published a report entitled the National risk Assessment of Money Laundering and Terrorist Financing. "There have been a number of incidents of theft - not just big crimes but also steady thefts from people's wallets". "They will be regulated in my view". In recent weeks, the agency sent subpoenas to dozens of ICOs for information related to their businesses. The move has been seen by most as a precursor to regulating the sector.

Addressing the Scottish Economics Conference in Edinburgh via a video today, Carney said that digital currencies showed the "classic hallmarks of bubbles" and this inherent risks meant investments in digital currencies could lose money.

Mark Carney: Cryptocurrency isn't real money and must be regulated