Over the last week, Mark Carney has been notably vocal in his criticism of the crypto market. He is calling for regulations to be put in place that combat some of the problems he perceives the market to have, but he also maintains that crypto assets are unlikely to represent the future of money.
Carney’s criticisms of the system haven’t added anything new to the argument per se, but they do give us an insight into current perceptions of the technology, at least in the eyes of those it threatens to wrestle power from.
Are the banks worried?
It would be safe to assume the answer to this question is, yes, they have been for some time. The Bank of America has been tenacious in its purchase of crypto-related patents, and it has even publicly declared in its annual report that cryptocurrencies are a threat to its business model.
Widespread adoption would not only provide central banks with strong competition, but it would also mean that to meet that competition the BOA would need to spend big to modernize or adapt the financial services that it currently provides.
These fears are shared over the pond it seems as the UK recently launched an inquiry into cryptocurrency and BOE Governor Mark Carney has had a lot to say about the technology since. The issue will almost certainly be addressed at the G20 meeting too.
Carney’s comments have perhaps been the most revealing of all, at least in recent news, as they highlight an emerging trend in the perception of crypto amongst banks. They all know they can’t afford to ignore the technology because it is not going away. Some are even choosing to jump on the bandwagon – the Swedish Riksbank is looking at issuing its crypto (the E-krona), and the Marshall Islands have just become the first country to release its crypto as legal tender.
Despite these developments, Carney has asserted that it is unlikely cryptocurrencies will ever replace fiat. However, he does believe that the technology, if properly regulated, could improve the way we interact with our money digitally. Though, if Carney is wrong, central banks won’t just need to look at the possibilities of the technology, they will have to adapt or die.
Regulation will likely have a considerable role in shaping the future of the crypto market, but it remains to be seen whether these regulations will attempt to combat the ideals with which Bitcoin was originally envisioned. There may be a drive to abolish the anonymity and autonomy provided by the technology to maintain the financial hegemony of central banks. But equally, with some early adopters taking an approach that facilitates innovation, and possibly setting a precedent for widespread usage, we’re likely to see these two sides clash in the future.
To most, widespread crypto adoption still seems like something for the distant future. It is so radically different to what we know that we always consider it innovation for tomorrow. But technology like this has a way of exploding suddenly into the mainstream. At the beginning of the last century, we saw how quickly oil became more important than coal, and the motorcar retired the carriage-pulling horse. The first two decades of this century could mark the beginning of another massive change. Banks, governments, and innovators all recognize this, and they’re scrambling to make sure, if this comes to pass, they will be the ones on top.
Michael is an English and Creative writing graduate of Liverpool John Moore’s University, a former editor of several magazines, and a crypto-currency enthusiast. He is mostly interested in crypto-legislation and the potential of decentralized technology to change the world.