David Ramsden, the Deputy Governor of Markets and Banking at the Bank of England (BoE), has argued that cryptocurrencies are “too volatile” to be considered a reliable store-of-value (SoV).
In a brief interview with CNBC on April 30th, 2019, Ramsden said that BoE’s officials have been keeping track of the “emerging developments and then thinking about what they mean” or how they’re relevant to our current economic system.
The Deputy Governor noted that “just over a year ago, the financial policy committee looked at cryptoassets in some detail” - as “supported by” and within the context of the latest developments in FinTech and modern banking services. He confirmed that England’s central bank still believes blockchain-based digital assets are highly volatile, based on their recent price movements.
Cryptoassets Not An Effective SoV Or MoE
Cryptoassets are also not a reliable medium-of-exchange (MoE) because the “cost of transactions” remains quite high, Ramsden claims. Because of these issues, the BoE’s management thinks cryptocurrencies don’t satisfy the basic “principles of being a currency.”
Ramsden also pointed out that “this is why” the BoE considers them to be cryptoassets, and not cryptocurrencies. Ramsden further noted that cryptoassets “did not pose a risk” to the overall stability of the much larger traditional financial system. This, as the current market capitalization of the crypto market, which presently stands at over $174 billion, is relatively small compared to the multi-trillion dollar global financial market.
BoE Continues To Monitor Crypto Markets
Despite not being able to negatively affect the traditional financial system, Ramsden said that the BoE continues to monitor cryptoassets. He revealed that the UK’s Treasury Department, the Financial Conduct Authority (FCA), and the Cryptoassets Task Force carefully examined the crypto industry.
According to the regulators, cryptoassets that “fall within” the current regulatory framework must comply with the European nation’s existing financial policies. However, Ramsden said that UK’s financial regulators “also had to be very mindful of [digital] assets and exchanges that [may be operating] in or outside” the UK’s regulatory guidelines.
"Very Positive" About DLT
Ramsden added that the BoE and other regulatory bodies in the UK “remained very vigilant about cryptoassets.” He continued to note that the BoE is “very positive” about the distributed ledger technology (DLT) that “underlies” cryptoassets. He also noted that part of his role “in embracing FinTech across the BoE" involves looking closely at the potential benefits of blockchain tech.
He also mentioned:
We are looking at the potential of DLT … for example, in the payments space, we’re making sure that our real-time gross settlement system can interface and be interoperable with blockchain/DLT technology.