Mark Carney, Governor of the Bank of England (BoE) and former Chair of the Financial Stability Board, has some thoughts about cryptocurrency.
They come as a surprise to people who are familiar with Carney’s past comments on crypto. However, they may be just a sign of the times – even if some say they’re a little dated.
What Is Carney Afraid Of?
At a recent economic forum, Carney voiced the concern that the dollar was endangering world finances.
The dollar has dominated global trade for the last century. As a result, many countries use it as a store of wealth. This prevents them from engaging in international trade. It’s the concern about spending versus saving, only on a global scale.
The problem is deeper than that, however. America’s finances are looking increasingly grim, in part due to the ongoing trade war with China. In essence, the dollar is the basket that the world has put all of their eggs into. Carney fears someone’s about to drop the basket.
How Can Cryptocurrency Help?
Carney doesn’t just see a problem, he sees a solution. Of course, this solution was not for the pound sterling to take over for the dollar. The UK’s sovereign currency has a similarly unstable future, largely due to uncertainty over Brexit.
If the share of trade invoiced in [a digital currency] were to rise, shocks in the US would have less potent spillovers through exchange rates, Carney said, according to The Guardian.
And trade would become less synchronised across countries.
Carney reportedly used the proposed Libra digital currency as an example, though he pointed out that it had problems.
Carney’s ideal currency would be backed by a number of different countries. This way, the currency would be widely accepted and upsets in any one country wouldn’t hurt the currency.
What Has the Response Been?
Since Carney made his comments, finance experts have been quick to respond. A common response is that a global cryptocurrency already exists in Bitcoin.
Bitcoin largely fits the description of what he’s looking for, cryptocurrency advocate Richard Galvin told Bloomberg.
Something ‘removed’ from country borders and independent country-specific interest rates.
Many also point out that Carney previously denigrated and downplayed cryptocurrency, most recently in a report filed last year.
Meanwhile, a number of British legal bodies and financial minds have spoken out in favour of increased cryptocurrency adoption. The Bank of England has largely looked favourably on cryptocurrencies, pointing out crypto is beneficial as more commerce is done online. Also, DeVere Group CEO Nigel Green recently championed the cause, saying that crypto could save the UK’s post-Brexit economy.
Naturally, Carney proposed a new currency rather than Bitcoin or Libra because it would allow greater regulation. Pursuing the best of both worlds, Carney wants a currency that can be controlled without being centralised.
It’s worth noting, however, that ‘Carney Coin’ likely wouldn’t be a major competitor to existing cryptocurrencies. Many Bitcoin advocates, for example, believe that Libra will actually improve Bitcoin adoption by introducing people to cryptocurrency. The case would be potentially similar in the case of ‘Carney Coin’.
Even with Carney’s perfect coin, multi-national currencies aren’t foolproof. The euro was supposed to do largely the same thing as Carney’s proposed currency. However, the economic crisis in Greece in recent years still greatly impacted the finances of other member countries.
One issue that few have pointed out is that Bitcoin is not free from uncertainty. While its concerns are not localised within a border or tied to a sovereign, single issues can still rock the price. Granted, this would be less true in the case of wider adoption.
Still, a multi-national cryptocurrency would help to promote some of the benefits to the individuals and the governments without bringing with it some of the fears related to state-backed crypto.
For example, China and India are working on state-backed cryptocurrencies. However, there is a general sense that this is so that the governments could use it as a means of surveillance. This would still be possible but would likely be much more difficult in the case of a multinational coin.