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Bank of England Advisor Not Worried About Cryptocurrencies as They Fail Basic Financial Tests

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On 21 January 2019, Huw van Steenis, senior advisor to the Governor of Bank of England (BOE) Mark Carney, told Bloomberg in an interview that he is not worried about cryptocurrencies when asked on their potential to threaten economic stability.

Van Steenis previously worked at Schroders, a British multinational asset management company, and Morgan Stanley, an American multinational investment bank and financial services company. He joined the BOE in 2018 and currently leads a review of the future of finance, investigating ways the country could become the focus centre of the financial industry in the future.

In the interview, he stated that cryptocurrencies “fail the basic tests of financial services”. He added that they are not excellent when used utilized as units of exchange, do not have value and are slower compared to typical currencies. Thus, there are other issues that concern him more than cryptocurrencies do when it comes to threatening economic stability.

Van Steenis opinions remain the same as when his op-ed was published in the Financial Times last September. In the piece, he expressed his thoughts on why Bitcoin (BTC) did not pass the innovation test.

In the interview with Bloomberg, Van Steenis also noted the weaknesses the BOE currently has. He stated that it is challenging for the BOE to add new entrants, especially those related to technology, to the banking system. He emphasized that traditional banks are not great at adopting new technologies.

Despite what the advisor said in the interview, the U.K. government is still paying attention to the digital asset. The Treasury of the United Kingdom established a team called the Cryptoassets Taskforce back in March 2018 which consisted of the BOE and the Financial Conduct Authority. The establishment aimed to develop a relevant and robust legal framework for cryptocurrencies while providing support for fintech innovation.

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The taskforce released a report back in October 2018 that listed risks involving cryptocurrencies such as the insufficiency of customer protection and potential manipulation of the market. The taskforce also proposed the categorization of cryptocurrencies into three main groups, namely ‘exchange tokens’, ‘security tokens’ and ‘utility tokens’.

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