BoE Governor highlights crypto stability issue
Davos speech by Bank of England Governor highlights volatility and illicit use as major considerations for regulation of digital currencies
Andrew Bailey, the Governor of the Bank of England (BoE), has expressed concern about the volatility of digital currencies, pointing out that the “stability of value” is a major consideration for regulation. During his participation in a panel discussion entitled “Resetting Digital Currencies”, held as part of the events of the World Economic Forum held in Davos, he said: “Existing cryptocurrencies do not provide enough guarantees to people that payments will be made properly with a stable value.”
According to Bailey, as cryptocurrencies were not created to make fixed-value payments and transfers, the industry is likely to move towards fiat-pegged stablecoins so that payments can be made in a fixed amount. For this, the leaders of the central banks of various countries must discuss the advantages of stablecoins and digital currencies.
However, Bailey also pointed out that digital currencies may help in terms of international remittances and settlement costs.
The BoE Governor said that “a sustainable digital currency has not yet been created”, and that in order to obtain it, important problems must be solved first, especially in the area of regulation. “Can we say we have governance mechanisms and designs for a truly sustainable digital currency? No, I don't think we have developed something like that.” He added that the regulation of cryptocurrencies is necessary to combat financial crimes.
Bailey indicated that central banks should start working in this direction and that the top priorities are to stabilise value, prevent the use of cryptocurrencies in illegal activities and find a middle ground in anonymity. “I think we are starting, and history will guide us in this regard. Don't think that technology is ahead of national interests. This is incorrect.”
Bailey’s statements come in conjunction with recent proclamations by senior officials in the United States and Europe about these concerns, including the possibility of using cryptocurrencies in illegal activities and the need to regulate them. On January 21, US Treasury Secretary Janet Yellen said that cryptocurrencies are a “particular concern” of law enforcement officials tasked with controlling money laundering and other forms of illicit financing.
On January 13, the President of the European Central Bank (ECB), Christine Lagarde called for global regulation of Bitcoin, saying she believes that the cryptocurrency can be used for money laundering and illegal activities.
Another panel discussion on cryptocurrencies is scheduled for January 28, with the participation of the executive director of the Overseas Development Institute, Sara Pantuliano; senior minister of the government of Singapore, Tharman Shanmugaratnam; and chairman of the National Institute of Financial Research at China’s Tsinghua University, Zhu Min.