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Bank of England: Cryptocurrencies fail basic financial tests

Huw van Steenis, senior adviser to Bank of England (BOE) Governor Mark Carney, said that cryptocurrencies do not pass fundamental financial tests.

Is the crypto potential in risk?

Van Steenis joined the BOE in 2018, having previously worked at Schroders and Morgan Stanley. He currently directs a review of the future of finance, according to Bloomberg. When asked about the crypto’s potential to become a threat to economic stability, van Steenis said:

“I do not worry so much about cryptocurrencies, they do not pass the basic tests of financial services, they are not a great exchange unit, they have no value and they are slower”.

Banking system and tech

Van Steenis said that the registration of new participants in the banking system, especially technology companies, is one of the main challenges for the BOE.

He also stressed that traditional banks are slow to adopt new technologies. “What I love when I meet with Fintechs is their obsession with clients, the challenge is to get clients before traditional banks can innovate,” he concluded.

Cryptoactives

In March, the Treasury of the United Kingdom created the Working Group on Cryptoactives, composed of the Financial Conduct Authority and the BOE, in order to develop a legal framework relevant to cryptocurrencies.

The Minister of Finance of the United Kingdom, Philip Hammond, said in a statement that the new crypto working group will work on the creation of industry standards to facilitate the collaborations of fintech and banks, as well as to support innovation throughout the Fintech industry.

In October, the working group published a report proposing to define the cryptoactives in three groups: exchange tokens, value tokens and utility tokens. He also pointed out the crypto-related risks, such as lack of client protection and the possibility of market manipulation.

Published inCryptocurrencies

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