Home / Archive / Cryptocurrencies ‘Failing’ as Money: Bank of England Governor

Cryptocurrencies ‘Failing’ as Money: Bank of England Governor

Last Updated March 4, 2021 5:05 PM
Josiah Wilmoth
Last Updated March 4, 2021 5:05 PM

Bank of England Governor Mark Carney has doubled down on his recent criticisms of criticisms of cryptocurrencies, arguing Friday that they are “failing” in their quest to fulfill the roles of money.

Cryptocurrencies ‘Failing’ as Money: Bank of England Governor

Carney, who also serves as the Chairman of the G20’s financial stability board, made this statement in a speech at the Scottish Economics conference, arguing that cryptocurrencies are not a viable alternative to fiat currency.

“The long, charitable answer is that cryptocurrencies act as money, at best, only for some people and to a limited extent, and even then only in parallel with the traditional currencies of the users,” he said. “The short answer is they are failing.”

The central banking chief said that Bitcoin and its peers are poor stores of value, inefficient media of exchange, and virtually non-existent as units of account.

Previously, Carney had told a group of students at the London-based Regent’s University that Bitcoin was not a legitimate currency, citing the same evidence to make his case.

Cryptocurrencies Still in Price Discovery Phase

However, proponents would likely respond that these criticisms are unfair, given that cryptocurrencies have been circulating for less than a decade and most people have likely only learned about them during the past year.

Indeed, their extreme volatility stems from the fact that they remain in a price discovery phase, as the market attempts to sort out what role they will play in the financial system over the long-term. This also explains why cryptocurrency-friendly merchants still denominate items in fiat currency, as well as why many users currently prefer to “hodl” than spend their coins.

And while cryptocurrencies may not yet be an efficient payment mechanism, their utility in this regard will increase as scaling solutions such as the Lightning Network (LN) go live and more retailers adopt cryptocurrency payments — as most British small business owners expect will happen soon.

Notably, however, Carney — in spite of his pointed criticisms — also acknowledged that cryptoassets have become a part of the mainstream financial system, which is why he argued that they should be held to the same regulatory standards as traditional assets.

Featured image from Shutterstock.