[2017-12-21] Bank of England Chief: Bitcoin Isn't a Threat to Financial Stabilit

[moriskarlov]

Bank of England (BoE) head Mark Carney said on Wednesday that bitcoin's meteoric price gains do not pose a threat to global financial stability.

Talking to British lawmakers in Parliament, Carney said that bitcoin's recent price moves are "significant" and more like an "equity-type risk," Reuters reports.

He stated that:

"At present, we don't view [bitcoin] as a financial stability issue."

Bitcoin is the number one cryptocurrency by market valuation, and recently reached an all-time high of around $20,000. At press time, it was trading at just over $16,700.

Carney, who also acts as chair of the G20's Financial Stability Board – a group of central banks and finance ministers that is also conducting its own blockchain research – further said that the idea of central bank-issued digital currency that can be used by the public has "some fundamental problems" unless there is a restriction in the amount that people can hold.

The BoE governor further noted, though, that he is "interested" in the distributed ledger technology (DLT) and that the central bank's own FinTech accelerator shows DLT's potential. According to a Bloomberg report, he added that the BoE is "active" in DLT, but is in no hurry to apply it to the core of the banking system, as any new technology has to satisfy a "five sigma quality rating."

Carney has been commenting blockchain since the start of the year, when he said DLT has the potential to "fundamentally reshape banking including by sharply increasing liquidity risk for traditional banks."

The official's statements come as global central banks are increasingly active in their work with blockchain and DLT.

The BoE has said that a forthcoming version of its real-time gross settlement (RTGS) system – which settles around £500 billion daily – will be compatible with distributed ledger technology. Meanwhile, monetary authorities in Canada, China and Russia, among others, have all expressed interest in a central bank-issued digital currency.

https://www.coindesk.com/bank-of-england-chief-bitcoin-isnt-a-threat-to-financial-stability/

[1Referee]

It's actually a welcome change for once that we don't see a central bankster go nuts (negatively) on Bitcoin. If we look at how things have gone in the last months, then basically every central bankster has been madly skeptical about Bitcoin, where some of them either call it a pyramid scheme, and others just warn for the risks of the volatility, which in this case I to a certain extent can understand. In order for Bitcoin to really disrupt the financial system, people have to start a revolution by taking distance from everything that's related to the current financial system on a massive scale, and that's something I can't see happening, except potentially in countries where the economical situation is very bad (e.g Venezuela, Zimbabwe).

[error08]

Obviously, bitcoin isn't a threat to financial stability, bitcoin created to be an alternative currency, even can not replace fiat currency.
Most people treat cryptocurrency as speculative object, get into the game of trading due to bitcoin's incapability to fulfill the demand of transactions per second, in other words; bitcoin can't be a medium of exchange at the moment.
Meanwhile, monetary authorities in Canada, China and Russia, among others, have all expressed interest in a central bank-issued digital currency.
There are a lot of plans that some countries want to issues their own cryptocurrency, but it won't works obviously. There is no point to create new digital currency as there is official fiat cureency, just adopt blockchain technology and go for cashless society.

[MMostaza]

The future is for the ones who can see all the possibilities that crypto currency is offering: https://www.coindesk.com/regulators-become-blockchain-innovators/

At least this is what I believe, and for what I have high hopes in to the Blockchain tech. Every step into accepting Bitcoins, smart contract tech, ICOs is a good news and is helping this ecosystem to improve.

[william8829]

I am not familiar with "five sigma quality rating." only six sigma.  Six sigma is simply a quality control protocol.  He is saying Bitcoin needs to work out a few kinks before greater implementation.  No argument there .

"fundamentally reshape banking including by sharply increasing liquidity risk for traditional banks."  Of course it would, the number of Bitcoins is finite, Central Banks print as much as they want whenever they want.  Bitcoin was never supposed to be a part of the Central Banks. "A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution."

The Central Bank does not consider Bitcoin a threat because they plan to implement there own distributed ledger technology.

In an issue of ECBs In Focus they describe three possible scenarios on who should have access to a world wide financial ledger

• indiviual institutions(local banks)
• core players(Central Bank)
• new world(peer-to-peer)

Based on there 'research' they believe the prudent choice is the Central Bank.

[Kemarit]

Hmmm. This is a first. And the guy looks like he knows that he is talking about. Not like those bankers who perceived bitcoin as a threat without really knowing how bitcoin works and how it can help people globally. Today, bitcoin is more of a store of wealth, go getting and buying bitcoin doesn't really poised a danger to bankers and even the financial and economic stability of a nation. On the contrary, have then seen what bitcoin can bring to countries like Venezuela and Zimbabwe? How can they are not giving their opinion on that? Bitcoin has help thousands of citizens in the aforementioned countries survived the economic turmoil that they are facing. Bitcoin for them is a life saver because "banks" have ceased to functions in those countries.

[webtricks]

More or less I agree with him.
If Apple Cap crossed 900B USD, then how it could be threat to Dollar itself! Equity market doesn't has inverse impact on Fiat System. It works in correlation to Fiat system.
In recent time, we have witnessed that Bitcoin has been more appealing as Asset/Security/Equity than Currency. As a result, its adoption has been increased for the purpose of investment or store of value. So it isn't big threat to Financial Market if government regulate Bitcoin in right way so there is little room for money laundering.

[iram1011]

I am not familiar with "five sigma quality rating." only six sigma.  Six sigma is simply a quality control protocol.  He is saying Bitcoin needs to work out a few kinks before greater implementation.  No argument there .

"fundamentally reshape banking including by sharply increasing liquidity risk for traditional banks."  Of course it would, the number of Bitcoins is finite, Central Banks print as much as they want whenever they want.  Bitcoin was never supposed to be a part of the Central Banks. "A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution."

The Central Bank does not consider Bitcoin a threat because they plan to implement there own distributed ledger technology.

In an issue of ECBs In Focus they describe three possible scenarios on who should have access to a world wide financial ledger

• indiviual institutions(local banks)
• core players(Central Bank)
• new world(peer-to-peer)

Based on there 'research' they believe the prudent choice is the Central Bank.

There are 6 sigma quality level. This usually measures the defect rate and he expect blockchain to reach 5 sigma quality level before implementing it in banking sector, is his call. I feel globally the adoption of distributed ledger has surged immensely in banking sector. He is weighing too much into sigma levels.

By blockchain technology increasing the liquidity risk for TRADITIONAL banks, he is not considering bitcoin here, but implementation of blockchain and cryptocurrencies in banking sector which will make conversion of asset to fiat difficult specially for traditional banks.