Mark Carney blasts Bitcoin, calls for cryptocurrency regulation
Cryptocurrencies such as Bitcoin should be regulated to combat illicit activities, promote market integrity and protect the safety and soundness of the financial system, according to Mark Carney.
In a speech at the inaugural Scottish Economics Conference, Edinburgh University, the Bank of England Governor argued that the time has come to hold the crypto-asset ecosystem to the same standards as the rest of the financial system. “Being part of the financial system brings enormous privileges, but with them great responsibilities.”
Elsewhere, Carney questioned whether cryptocurrencies will ever become effective media of exchange. Currently, no major High Street or online retailer accepts Bitcoin as payment in the UK, and only a handful of the top 500 US online retailers do, he said. “For those who can find someone willing to accept payment for goods and services in cryptocurrencies, the speed and cost of the transaction varies but it is generally slower and more expensive than payments in sterling. That’s because the more heavily used cryptocurrencies face severe capacity constraints compared with other payment systems. For example, Visa can process up to 65,000 transactions per second globally against just seven per second for Bitcoin.”
He added: “If you use a debit or credit card in the UK, the transaction is completed in seconds and without exchange rate risk. In contrast, Bitcoin users can face queues of hours. Those wanting to get to the front to make time-pressing payments – for last orders, for example – need to offer up a transaction fee sufficiently large to persuade Bitcoin “miners”, who verify and process transactions, to do so quickly. The fees paid vary through time, but reached £40 in late 2017. Fees are currently around £2, but even that is expensive relative to cash, cards or online payments which cost the retailer around 1.5 pence, 8 pence and 19 pence respectively.”
Over time, transaction fees could rise further because the subsidy miners enjoy by being partly paid with rewards of new units of currency, will decline given the total supply of Bitcoin cannot exceed 21 million. Furthermore, the costs of mining are enormous, Carney pointed out. “Its current annual electricity consumption is estimated by some to be up to 52 terawatt hours, double the electricity consumption of Scotland. In comparison, the global Visa credit card network’s energy use is less than 1/2 of 1% of that of Bitcoin, despite processing 9,000 times more transactions.”