SCOTCOIN and other cryptocurrencies must be regulated to combat crime, Bank of England governor Mark Carney has warned.
In a speech yesterday, Carney warned those investing in the digital currencies could lose out due to the inherent risks involved.
He argued that these losses could erode faith in the financial system and said the currencies are poorly understood.
Addressing the first-ever Scottish Economics Conference at Edinburgh University, Carney stated: “The time has come to hold the crypto-asset ecosystem to the same standards as the rest of the financial system.”
Carney was unable to attend the capital event in person due to transport problems caused by the Beast from the East weather conditions, and instead used technology to address the audience.
He said the “extreme volatility” of cryptocurrencies shows that they have “neither intrinsic value nor any external backing”.
There was a surge in interest in the virtual money late last year as a result in a spike in Bitcoin value, but that currency had depreciated by almost 65 per cent by the start of February.
Carney said risks to financial stability could rise if cryptocurrencies become further used in retail transactions or formal trading “without material improvements in market integrity, anti-money laundering standards and cyber defences”.
He went on: “Authorities are rightly concerned that given their inefficiency and anonymity, one of the main reasons for their use is to shield illicit activities. This cannot be condoned.”
While the UK has not taken firm action on cryptocurrencies, other countries have. Bitcoin is banned as a means of payment in both Bangladesh and Indonesia, while China has closed exchanges offering the currency.
Warnings have also been issued by India’s central bank.
Despite calls for regulation, Carney said the Bank of England has an “open mind” about the eventual development of a central bank digital currency in the future.
Scotcoin was launched in 2013 and runs as a community interest company, while Tory peer Michelle Mone revealed she is to launch her own cryptocurrency Equi with partner Doug Barrowman last month.
Mone, who made her fortune with lingerie company Ultimo, predicted the new operator would become “one of the most successful” ventures of its kind. Pre-sale will begin this month, with the focus on fledgling tech firms.
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