Payments Awards

Bank of England proposes regulation of cryptocurrency exchanges

Written by David Adams
05/03/2018

Bank of England governor Mark Carney has suggested that the virtual exchanges used to clear cryptocurrency transactions should be formally regulated, to protect consumers without stifling innovation.

In a speech delivered via videolink to the Scottish Economics Conference in Edinburgh on Friday, Carney said that “holding crypto asset exchanges to the same rigorous standards as those that trade securities would address a major underlap in the regulatory approach” – and thus help to reduce use of cryptocurrencies for money laundering and the financing of other criminal or terrorism activity.

A spokesperson for CryptoUK, which set itself up as a self-regulatory trade body for the cryptocurrency industry earlier this month said it welcomed the governor’s comments.

“We support the Governor’s principle on the benefit of regulation,” said the spokesperson. “This shouldn’t be viewed as a crackdown, but as an opportunity to establish parameters that protect consumers while encouraging the biggest and best cryptocurrency businesses to make the UK their home.”

However, the spokesperson continued, it would be a mistake for policymakers and the Bank of England to attempt to retrofit existing financial regulation onto cryptocurrencies. CryptoUK is calling instead for dialogue with regulators to inform development of an appropriate regulatory framework.

“The UK has an exciting opportunity to become a world leader within the crypto economy and to attract new talent, particularly in a post-Brexit climate,” said the spokesperson. “Now more than ever is the time to show that our financial markets invite financial innovation through a regulated framework.”

The past month has seen the announcement of an enquiry into digital currencies and distributed ledger technology by the House of Commons Treasury Select Committee in the UK, along with reports that the Securities and Exchange Commission (SEC) is investigating technology companies and individuals who are working with cryptocurrencies; and a range of influential people queueing up to say rude things about cryptocurrencies in general and Bitcoin in particular. They included Bill Gates, who said cryptocurrency was causing death by facilitating criminal activity; and Agustin Carstens, general manager of the Bank for International Settlements, who called Bitcoin “a bubble, a Ponzi scheme and an environmental disaster”.