'Fools' attracted to cryptocurrencies like Bitcoin, warns BoE chief Mark Carney

Mark Carney

Mark Carney

Why do bankers hate bitcoin?

Other virtual currencies were down, with rival Ethereum, the world's second largest cryptocurrency by market cap, falling 1.20% to $858.88 on the Bitfinex exchange.

Digital assets are increasingly coming under the scrutiny of regulators. Advocates, however, suggest the reason is a fear of the unknown, and loss of control.

According to Carney, digital currencies should be regulated to protect consumers and stop their use for illegal activities.

Bank of England governor Mark Carney launched a scathing attack on cryptocurrencies such as Bitcoin by saying that they should be regulated to protect the financial system.

But he warned this might change unless action is taken.

"At present, crypto-assets raise a host of issues around consumer and investor protection, market integrity, money laundering, terrorism financing, tax evasion, and the circumvention of capital controls and worldwide sanctions", the governor said. "Over the past five years, the daily standard deviation of bitcoin was ten times that of sterling".

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".

Carney endorsed the push by the U.S. Securities and Exchange Commission to classify cryptocurrencies as securities subject to laws governing how they are issued and traded. "Currently, no major high street or online retailer accepts bitcoin as payment in the United Kingdom, and only a handful of the top 500 USA online retailers do".

Cryptocurrency exchanges to face regulatory clampdown, says Bank of England's Mark Carney

"Far from being strengths, the fixed supply rules of cryptocurrencies such as bitcoin are serious deficiencies".

In the US, the Securities and Exchange Commission is investigating the initial-coin-offerings (ICO) industry. Legal clampdowns have also been touted in China, South Korea and Russian Federation.

Companies use ICOs, which is a combination of crowdfunding and cryptocurrencies, to raise money by offering investors a digital token in exchange for money. "The decentralized and now unregulated nature of the beast means cryptocurrency trades circumvent the banking industry".

Meanwhile, in China, officials are cracking down on anyone connected to trading in cryptocurrencies, which has been banned since previous year. Known as the blockchain, this is essentially a digital ledger of all transactions that can not be tampered with or altered.

What do you think of Carney's speech to Bloomberg?

"Some of the underlying technologies are exciting", he stated.

The Bank chief also conceded that the distributed ledger technology which underpins cryptocurrencies can act to help the way payments are made evolve.

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

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