The governor of the Bank of England, Andrew Bailey, has warned the crypto sector that digital currencies such as Bitcoin will not last long in their current form due to a lack of design and governance that will give them staying power in global finance.
Speaking during a panel on digital currencies at the World Economic Forum on Monday, Bailey said while digital innovation in payments was likely to remain, cryptos in their current form were unlikely to last despite a recent surge in the value of Bitcoin.
“There have been huge innovations in payments in recent years but we still have some very big gaps to fill…Have we landed on what I would call the design, governance and arrangements for a lasting digital currency? No, I don't think we're there yet. I don’t think cryptocurrencies as originally formulated are it”, Bailey said.
However, the central bank governor said there is room for innovation, particularly concerning stablecoins, cryptocurrencies that derive their value from a different asset or basket of assets such as the US dollar or gold.
“The whole question of people having assurance that their payments are going to be made in something with stable value”, Bailey said.
Despite being held as the new forefront of payments technology, Bitcoin and other cryptocurrencies have attracted sceptics from central bankers and other financial heavyweights amid concerns over the stability of their value as well as their unregulated nature.
Earlier in January, European Central Bank (ECB) president Christine Lagarde said Bitcoin has been involved in “some funny business” as well as “some interesting and totally reprehensible money laundering activity” and that any loopholes in regulation needed to be closed to prevent similar activity in the future.
The ECB boss went on to say Bitcoin as still a “highly speculative asset”, a view echoed by the UK’s Financial Conduct Authority (FCA), which warned crypto investors that they should be “prepared to lose all their money” if they parked it in digital assets.
Bitcoin was trading around 7.6% lower on a 24 hour period at US$31,591 in lunchtime trading in London on Tuesday.