On Friday, the Bank of England — the United Kingdom’s central bank that acts independently of the government — joined other international financial institutions in proposing to enact cryptocurrency regulations. It’s a move that could lead to more red tape for U.K. bitcoin owners and a general downswing in market activity.
The bank’s governor, Mark Carney, delivered a speech at the Scottish Economics Conference at Edinburgh University regarding his stance on digital currencies. He said that an unregulated cryptocurrency market leads to abuse by criminal actors and could pose major financial risks in the future.
“The time has come to hold the crypto-asset ecosystem to the same standards as the rest of the financial system,” declared Carney. “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 international sanctions.”
China has been the country that has cracked down the hardest on cryptocurrencies, banning all initial coin offerings and shuttering bitcoin exchanges.
Carney believes that banning the use of digital currencies is going too far. He says the underlying technology that powers the sector could be used to “catalyse innovations to serve the public better.” But he said that regulations are the means to get that done.
“A few jurisdictions have banned crypto-assets outright,” he stated. “A better path would be to regulate elements of the crypto-asset ecosystem to combat illicit activities, promote market integrity, and protect the safety and soundness of the financial system.”
Carney went on to say that he “has an open mind” about developing a central bank for digital currency, which could effect trade volume of bitcoin and other altcoins.
Many people are drawn to cryptocurrencies because of the lack of bureaucracy and the anonymity the technology gives investors. Involving central banking institutions like the Bank of England takes that away and could dissuade newcomers and veterans alike from trading, which would lead to a decrease of market activity.
No concrete regulations have been drafted just yet, but expect them to be on the Bank of England’s drawing board fairly soon.