With the UK in the grip of freezing weather, complete with driving snow and bitter Arctic winds, it seems that some major movers and shakers in the world of finance have decided to take a shot at Bitcoin. Here at The Armchair Trader the jury is still out about trading cryptocurrency, but we are old enough to have been covering the dotcom boom in the 1990s and recognize a change in pace and a disruption to established ways of doing business when we see it.
Bank of England governor Mark Carney took the opportunity to have a stab at Bitcoin this week, calling the claims that Bitcoin could become a fiat currency “tenuous” at best, and pointing out that the energy demand required to mine coins at the moment amounts to twice the electricity consumption of Scotland.
Trading cryptocurrency – of ‘growing interest’ to regulators
Carney was speaking at the Scottish Economics Conference at Edinburgh University when he said that he saw cryptocurrencies as “of growing interest to policymakers, many of whom prefer to term them as crypto-assets expressly because they are not true currencies.”
Carney was not all doom and gloom, however. He sees the opportunities for the development of the financial markets as well.
“Whatever the merits of cryptocurrencies as money, authorities should be careful not to stifle innovations which could in the future improve financial stability, support more innovative, efficient and reliable payment services as well as have wider applications.”
Carney said he still thought there were serious questions to be answered about whether cryptocurrencies are being used for money laundering and terrorism financing activities. In this he was in disagreement with a recent assessment by the UK Treasury in December which declared that there was a low risk of Bitcoin or other cryptocurrencies being used for either purpose.
“It’s confusing that he linked cryptocurrency to money laundering and terrorism when the Treasury’s report appeared to be in stark contravention of these claims,” says David Merry, CEO of cryptocurrency specialists Investoo Group. “I agree that cryptocurrencies pose no threat to the financial stability of the United Kingdom, however I think that over time, as retailers look to adopt them for purchases, they will become more prominent.”
“Cryptocurrencies pose no threat to financial stability”
Merry says that a relatively small proportion are trading cryptocurrencies, and they tend to be younger. Like The Armchair Trader, he makes the comparison with the Internet:
“Back in the 1990s no one could have imagined how that innovation would change the world. And experts were queuing up to say the Internet would fail. Only time will tell how cryptocurrencies and blockchain will change the landscape, no one will be able to predict this accurately.”
The Armchar Trader says:
The market for cryptocurrencies is a fast moving one. The average investor still has little understanding of how they work in practical terms or the role played by blockchain in this market. But the demand for them in the market is there, perhaps further fueled by the suspicion a new generation of traders have about the fiat currencies, which have been sustained by so much quantitative easing of late. For more on cryptocurrencies, check out our guide on cryptocurrencies.