Category Archives: Mark Carney

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Global Regulators Consider Capital Requirements on Bank Crypto Holdings

Cryptocurrency assets held by banks may soon become subject to new capital requirements enforced by global financial regulators, as they struggle to fit digital currencies into conventional asset ordinance.

In a report published Monday by the Financial Stability Board (FSB), the Basel Committee on Banking Supervision outlined an agenda of promoting financial stability through strengthening regulation and supervision of banks worldwide. The report was aimed at its 20 members and proposed capital requirements for crypto assets held by banks.

The regulations offered in the review would require capital lenders to adjust their services to the cryptocurrency market, namely protecting themselves against market volatility and other accompanying threats. While these regulations would bring digital currency assets in line with existing rules for established forms such as mortgages, they could push up financing costs for firms.

The Basel Committee’s members include the US Federal Reserve, as well as the European Central Bank. An ongoing study by the committee is researching how each member currently treats domestic cryptocurrency asset exposure. The FSB is reportedly waiting for the results of this inquiry before clarifying the applicability, or details of the new capital requirements.

The FSB’s position on crypto

While the FSB has said it does not believe digital currency assets present a threat to current financial order, it has continued to study and develop ways of surveying the market. Issues including pump and dump schemes, manipulation, access to price information, and volatility have been cited by the FSB as necessary to amend.

Bank of England Governor Mark Carney chairs the FSB, who is himself a vocal critic of cryptocurrencies. In March, he called for an end to what he described as the ”anarchy” surrounding the industry, saying the time had come for digital assets to face the same regulations as the rest of the financial system.

This sentiment expressed falls along a very similar line of the proposed standardization of regulating cryptocurrency assets the way traditional assets are.

 

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South African Central Bank Ethereum Blockchain Tests Successful

The South African Reserve Bank (SARB) has just completed a multi-bank testing of bank-to-bank transfers using blockchain.

South Africa’s central bank has been testing the Ethereum based platform Quorum in collaboration with eight banks including SARB, Absa, Capitec, Discovery, Investec, FirstRand, Nedbank, and Standard Bank.

The program, called Project Khoka spread over 14 weeks, conducted tests which replicated transactions normally handled by the South African Multiple Gross Operation Settlement System (SAMOS), rather than handling actual transactions.  The project was aimed at proving that a DLT based program might be able to replicate SAMOS which can handle 70,000 daily transfers in two hours.

Project Khoka successfully used public cloud servers offered by Microsoft Azure and Amazon Web Services to add power needed for the transaction verifications.  SARB was happy with the outcome of the tests and claimed that the Quorum blockchain handled the transfers with “scalability, resilience, confidentiality, and finality.” The SARB post-test report stated:

“Both the process, as well as the outcome of the project, contribute to the SARB’s goals. The decision was made to assess the use case for DLT in wholesale payments and interbank settlement and thus build on and extend the work done in other parts of the world.”

SARB suggested that more testing would be required before DLT is suitable for such interbank settlements as exhibited in the trial, and if proven satisfactory for bank use would most probably be utilized as a backup system, rather than actually replacing its current system, according to Francois E. Groepe, SARB’s Deputy Governor.

Banks are increasingly testing DLT for interbank settlements around the world, some aiming to use blockchain in order to update outmoded systems. Recently the Bank of England announced that it was rebuilding its Real Time Gross Settlement (RTGS) system to work with DLT. The announcement came after BoE Governor Mark Carney commented that private business and platforms need to be able to work with the bank’s own RTGS system.

RTGS is a system generally used to transfer large volumes of funds between banks.

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Trump’s New Trade Tariffs Could Kick Start Bitcoin

As US president Donald Trump shocks the world with his surprise steel and aluminum tariffs targeted at Canadian, Mexican and EU markets, Bitcoin markets could be the beneficiary, according to Forbes..

The response from Canada, the UK, France, and Mexico has been one of surprise and total indignation, pointing to the possibility of a trade crisis between the nations involved. These apparently punitive and protectionist measures could provide the much-awaited positive swing for Bitcoin, as it could become an ideal hedge opportunity as a result, providing that President Trump‘s latest measures aren’t rescinded due to a global response against the US.

Traders are now bracing themselves against the possibility of market volatility which will work very much in Bitcoin’s favor, as investors look for fundamentals to support the price of Bitcoin and positive indicators and motivators for change.

The recent Consensus 2018 event in New York was seen by some as the kind of shot in the arm needed to reinject enthusiasm in the sluggish Bitcoin market, but it proved to lack any real energy as a contributing driver to market despite offering headlines about Lamborghinis to news sources.

The last two months have seen numerous positive comments from central banks regarding some kind of CBDC. On both sides of the English Channel, politicians have waxed lyrical about cryptocurrency with even Canadian Bank of England Governor Mark Carney manufacturing a dramatic turnaround after his earlier view that Bitcoin had “failed”.

China with a cryptocurrency ban in place has now begun to take blockchain technology seriously, led by recent comments by Chinese president Xi Jinping, who now promotes the benefits of the new technology. Chinese investors welcome this, and reports indicate that it’s a question of time before the Bank of China follows suit. If the People’s Bank of China takes that route, it may impact on the way that Bitcoin and other currencies are regarded by the government, blockchain being the underlying technology behind digital currencies.

Cryptocurrency investors will be watching the development of what is already becoming a trade war between the US and its former trading partners with great interest, hoping that it could become another important factor in reinjecting energy into the Bitcoin market.

 

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Bank of England Governor Openly Considers a Central Bank Digital Currency (CBDC)

Mark Carney, Governor of the Bank of England, spoke at the Riksbank Anniversary conference on Friday, putting forward an open-minded stance about the possibility of a central bank digital currency (CBDC).

Potential CBD for England

As reported by Bloomberg, while Carney appeared open to the idea, he also pointed to several issues that prevented him from offering his full support for a CBDC. Specifically, Carney stressed his view that cryptocurrencies are not a true equivalent of money, and that should a CBDC be adopted, it will not be capable of happening successfully in the near future.

During his speech, Carney went on to explain that the Bank of England is looking to boost diversity within the institution by engaging with people who not only come from a mainstream economic background. “The future of central banking may involve fewer central bankers, ” he said, indicating perhaps a future direction more compatible with the cryptocurrency field.

Sweden’s central bank Riksbank hosted the conference. Risbank is currently researching the practicality of implementing an e-krona, a CBDC for Sweden, with results from the inquiry scheduled to be published in 2019.

Carney and Crypto

The Bank of England issued a working paper earlier this month, detailing results of an extended inquiry into the possible financial risks and stability issues associated with CBDC. The report indicated that there was no probable cause to assume adopting a CBDC would create issues surrounding private credit, or total liquidity provision to the economy.

Carney has not held back on his personal, skeptical view of cryptocurrencies in the past. In February this year, he stated ”[cryptocurrency] has pretty much failed thus far on… the traditional aspects of money. It is not a store of value because it is all over the map. Nobody uses it as a medium of exchange.”

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Bank of England on Crypto: Not If, but When

The Bank of England (BoE) has published recent findings for central bank digital currencies (CBDCs) that indicate such a government-issued currency is no longer a possibility, but an inevitability.

The BoE’s recent findings suggest that a CBDC is entirely feasible and can be introduced with a minimum of risk, although it is unclear exactly what form it will finally take, once commercial banks are forced to adopt a new system.

In line with several countries around the world, the BoE is beginning to examine the credentials of a CBDC in order to streamline its banking procedures, enabling funds to be expedited quickly and efficiency, updating outmoded banking systems.

The possibility of a government-issued cryptocurrency being not too distant is not that surprising, given the current mood at top levels of government in the UK. A ‘Cryptoassets Task Force’ is currently underway to examine the space to see if it can become a feature of the UK financial environment. British Chancellor Philip Hammond recently launched a task force to help safeguard consumers which include representatives from the Treasury, the BoE and financial watchdog FCA. He said the taskforce would help the UK “manage the risks around crypto-assets”.

Such calls for regulation were also made recently by the Governor of the BoE, Mark Carney, when he discussed the impact of cryptocurrencies’ core technology indicating that he was not against innovation provided by cryptocurrencies, stating that regulation could potentially “serve the public better”. This following his comments that cryptocurrency “had pretty much failed” as a source of money.

Three models suggested

The Financial Institution Model (Model F1) is a system where only financial institutions will be able to access the CBDC. The report suggests this is a safe approach offering a stable approach to banking, reports Finder.

The Economy-Wide Model (Model EW) where financial institutions can directly access CBDC, and businesses and households can access CBDC through financial institutions. Under this model, all banks, non-bank financial institutions (NBFIs), CBDC exchanges, households and businesses can have a CBDC account at the central bank itself. But only banks, NBFIs and CBDC exchanges can trade CBDC directly with the central bank. Households and firms can go through the exchanges, which might be standalone entities or banks/NBFIs, to convert deposits between CBDC and pounds.

The Narrow Bank Model (Model FI+). A system where financial institutions can access CBDC, and then use a spin-off “indirect CBDC” (iCBDC) for its business and household customers. This system is designed to include CBDC as the actual central bank money, and iCBDC as the connected digital currency that people interact with on a day-to-day basis.

The main question being asked now that the bank has made these significant moves towards a CBDC is what kind of currency will emerge. Will it be a digital currency for all to streamline the population’s everyday banking needs or will it simply be an instrument with which banks can save costs?

 

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UK ‘Cryptoassets Task Force’ Begins on Positive Note

The UK government’s ‘Cryptoassets Task Force’ met for the first time on 21 May as part of the country’s plan to regulate the cryptocurrency and blockchain space, reported Crowdfund Insider.

One of the functions of the UK government’s task force will be to examine the risks of blockchain technology and mitigate these while examining the benefits of ledger technology in financial services. The Cryptoassets Task Force, consisting of the UK Treasury and the Financial Conduct Authority (FCA) has been set up for this purpose and is expected to report back in the summer with its findings in a roundtable scheduled for July, according to Bitcoin News.

The previously announced group involves the participation of the FCA, Bank of England (BoE), HM Treasury and other senior government officials. Some of the named participants include Katharine Braddick, director general of financial services at HM Treasury, Andrew Bailey, chief executive of the FCA, and Dave Ramsden, deputy governor of the BoE.

Bailey commented on the cryptocurrency status quo in the country saying that he was looking forward to working with both the BoE and the UK Treasury in order to develop policy.

Ramsden started on a positive note focussing on the what he saw as the potential benefits to the financial system on the UK economy:

“This task force will enable us to work closely with the Treasury and the FCA to explore how the opportunities posed by these technologies can be realized, while also tackling the risks arising from crypto assets.”

The task force’s analysis will not be limited to the central bank and regulatory bodies, but will welcome contributions from trade bodies, consumer groups and investors, in order to obtain a broad view of opinion from both government and public institutions.

The UK is known as a driving force in blockchain research and the spread of solutions is being utilized by numerous companies, as the country becomes one of the world’s most significant and dynamic fintech hubs. The government is keen to see further development of non-traditional innovation in the light of this recent progress.

BoE governor Mark Carney has moved over time from a position of claiming that cryptocurrency had “pretty much failed” as a form of money, to recent indications that he was not against innovation provided by cryptocurrencies, stating that regulation could potentially “serve the public better”.

British Conservative Member of Parliament (MP) Matt Hancock delivered a speech to the Law Society last month commenting that blockchain technology would have a “monumental impact” on people’s lives in the future.

 

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Mark Carney Repeats Crypto “No Risk” Claims at Canadian Forum

Bank of England’s governor Mark Carney has declared during a speech in Toronto that digital currencies are no risk to the financial environment.

At the Public Policy Forum’s Canada Growth Summit held on 12 April, Carney suggested that digital currencies were “no risk” to the financial world as yet, despite the “huge amount” of illicit activity attached to them. His comments, echoed in a letter he sent to the recent G20 summit in Argentina, argued that as yet, these currencies are no risk as they are not attached to the financial system and still small.

Former Bank of Canada head Carney has continued to push for tighter regulation for cryptocurrencies over past years, suggesting that without regulation they are open to abuse when exchanged against fiat currencies, saying, “there’s plenty of serious abuse or at a minimum, they are very porous to a cyber attack and theft and they just do not meet the standards.”

In Carney’s home country, the Bank of Canada as recently stated that globally aligned policies governing cryptocurrencies are needed. The Ontario Securities Commission (OSC) stated this month that it was currently gathering information on several cryptocurrency trading platforms after receiving complaints about their activities.

This OSC move comes amid the rise of exchanges to trade digital currencies, as well as initial coin offerings to launch new ones. Sharp rises in prices for the new currencies last year created an upsurge of interest in Canadian startups.

The Bank of England governor has always been skeptical about introducing digital currencies into the financial system. He stated earlier this year that the cryptocurrency ecosystem could be incorporated if the same regulatory approach and “rigorous standard” used in conventional financial systems were applied to cryptocurrencies.

Carney’s views on cryptocurrencies have softened in recent months, commenting recently that digital currencies like Bitcoin should be regarded as assets.

 

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Possible Boost to UK Cryptocurrency After Positive Government Comments

UK government comments made on 22 March at the UK Treasury’s International Fintech Conference indicate that the UK government sees regulation as a way of enabling a “stable” cryptocurrency exchange in the City of London.

UK city minister John Glen’s comments suggested that regulation could be a “significant boost”  to the local cryptocurrency industry should the government be able to find an appropriate level of regulation. Although it’s unclear exactly what an appropriate level will look like in real terms, such discussions regarding boosting the cryptocurrency industry might be viewed by the industry as positive language. John Glen was quick to point out that current levels of trading activity posed no significant risk to the economy.

Speaking at the conference, the UK Chancellor of the Exchequer, Philip Hammond, launched the Fintech Sector Strategy, designed to further trading relations with Australia. A major factor in this potential partnership includes understanding emerging technologies such as blockchain and harnessing their potential.

One of the functions of the UK government’s task force will be to examine the risks of blockchain technology and mitigate these while examining the benefits of ledger technology in financial services. The Cryptocurrency Task  Force,  consisting of the UK Treasury and the Financial Conduct Authority has been set up for this purpose and is expected to report back in the summer with its findings.

Such calls for regulation were made last week by the Governor of the Bank of England, Mark Carney, when he discussed the impact of cryptocurrencies’ core technology indicating that he was not against innovation provided by cryptocurrencies, stating that regulation could potentially “serve the public better”. This following his comments that cryptocurrency “had pretty much failed” as a source of money.

Chancellor Hammond commented at the conference that “every hour a new tech business is founded in the UK and my aim is to make that every half hour” and indicated that the UK would open its doors to innovators and inventors. He suggested the task force as a first step towards automating financial compliance in the UK.

 

 

 

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Bitcoin on the Rise: Bullish Trends and the G20 Influence

It has been a tough month for Bitcoin coming off the winter boom but there have been several standout moments offering respite from bearish trends and contributing to the current uptrend in the Bitcoin markets.

Firstly, Thomas Lee, the head of research at Fundstrat Global Advisors and his team have released an interesting flow chart (below) that describes the phases of the altcoin market cycle.

While it indicates that the majority of the decline is behind us, their graphs don’t quite inspire an immediate sense of confidence with the purgatory phase apparently in effect and it is still relatively hard to tell when things will begin to look definitively bullish again.

The Risk of Stagnation

How deep this current period will be is still unknown, but it could be noted that markets tend to react swiftly, particularly to positive news, progress in innovations and regulations.

The stakes for blockchain technologies and cryptocurrencies are higher than ever; the past couple of years have seen massive progress with efforts to make the industry more consumer-friendly and regulation-compliant. Despite the scandals of scam ICOs and the recent crackdown on cryptocurrency advertising, the blockchain industry is holding on tight and is more active than ever.

The pressure on altcoins to adapt or die is growing and this slump could spark further indecisiveness and cynicism, dampening the progress that new or established blockchain companies have been making over the past year.

These being worst case scenarios, anything at all can happen in this business, so it’s best to keep an open mind, especially as big organizations, governments, industry heads and key figures are all putting the conversation about cryptocurrencies on the table.

A Good Influence

The G20 Summit is considered partly responsible for the upswing Bitcoin has seen over the past couple of days. Mark Carney, governor of the Bank of England, stated in a letter to G20 finances ministers: “The FSB’s initial assessment is that crypto-assets do not pose risks to global financial stability at this time.”

He continued: “Crypto-assets raise a host of issues around consumer and investor protection, as well as their use to shield illicit activity and for money laundering and terrorist financing. At the same time, the technologies underlying them have the potential to improve the efficiency and inclusiveness of both the financial system and the economy.”

A Little More Conversation and A Lot More Action

If the brains at Fundstrat are correct, then this low period of inactivity and consolidation could be a sluggish ride and set the evolution of this industry back for some time. This is the chance for the industry to begin shaking hands with the regulators, influencers and institutions that can begin to create a space for the technology in the everyday lives of the world.

Conversations such as this may only boost Bitcoin value for so long, however, and the bear market could still very well be in play. But the critical part to take away from all of this is that more and more powerful influencers are talking about how to make cryptocurrencies work.

Now let’s see some action.

 

 

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