Bank of England governor says Bitcoin isn’t a threat to financial stability

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Mark Carney, governor of Bank of England (BoE), declared on Wednesday that despite the meteoric rise in its price, Bitcoin does not pose a threat to financial stability.

Reuters reports that Carney addressed British lawmakers in Parliament and said that the recent price spike is “significant” and more like an “equity-type risk”. He stated that:

“At present, we don’t view [bitcoin] as a financial stability issue.”

Carney, also the chair of the G20’s Financial Stability Board, further explained that the idea of a central bank-issued digital currency that can be used by the public has “some fundamental problems”, unless one can place limits in terms of the amount that people can hold.

The governor made an interesting point, saying that he is interested in the distributed ledger technology (DLT) and that the central bank’s own FinTech accelerator shows DLT’s potential. Bloomberg reports that Bank of England is “active” in DLT but is not rushing to apply it to the core of the banking system as the DLT still needs to satisfy a “5 sigma quality rating”. Mark believes DLT has the potential to “fundamentally reshape banking including by sharply increasing liquidity risk for traditional banks.”.

Importantly, BoE that it is currently working on an updated version of real-time gross settlement (RTGS) system which will be compatible with the distributed ledger technology. The current version of the RTGS currently settles around £500 billion on a daily basis.

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