• The cryptocurrency risk does not involve central banks, according to Carney.
• Central banks are creating their digital currencies.
Mark Carney, former Governor of the Bank of England, said that there is limited cryptocurrency risk, so most investments are reasonably reliable. From a financial viewpoint, according to Carney, cryptocurrencies are not dangerous. However, he cautioned against making certain financial decisions regarding crypto.
Carney clarified that the state ultimately supports any forms of private financial novelty. He however claimed that there is a possibility for financial turmoil, and central banks ultimately do not want the center of their system to be part of this state of shock.
These comments from Carney are made after the crypto market made significant corrections. These changes can be linked to threats about the regulation of Bitcoin by China or the United States.
The innate cryptocurrency risk occurred to Bitcoin last week when its price fell over 50%. In previous months the cryptocurrency had reached its all-time high, positioning itself at $64,800.
Carney on the cryptocurrency risk
Mark Carney, who resigned as Governor of the Bank of England in March, supports the volatility of cryptocurrencies. For Carney, it is interesting how a digital currency, without external support, can reach such a high value. The former BOE governor made a book called “Value: Building a Better World For All,” where he talks about crypto in depth.
The Vice President of Brookfield Asset Management said that the cryptocurrency’s implicit price is based on the beliefs of its supply.
Central Banks globally have primarily taken a skeptical outlook when talking about cryptocurrencies. James Bullard, chairman of the Fed in St Louis, said traders understood the cryptocurrency risk but this did not stop their investment.
Bullard is neutral on crypto
Bullard clarifies that many investors enter the crypto market with their eyes open. Many people know that cryptocurrencies are volatile, but they still bet on them. As a final note, the Fed chairman adds that investors should be careful when taking on this cryptocurrency risk.
But the new Governor of the Bank of England, Andrew Bailey, was clearer than Carney in saying that cryptocurrencies are of extrinsic value. Bailey said that people have to buy cryptocurrencies as if they would lose money, so there are no surprises.
The disproportionate rise in cryptocurrencies and their value has thrown the central bank-supported virtual currencies out of balance. In early 2021, the Bank of Japan, the European Central Bank, the Bank of England, the Bank of Canada, and Sveriges Riksbank created a research group to check for the benefits of taking on a central bank digital currency.
Lael Brainard, Governor of the Federal Reserve, defended the digital dollar and noted that the Fed is improving its public participation. Up to 80% of central banks worldwide are planning to create their cryptocurrencies, as indicated by the Bank for International Settlements.
Carney believes in digital currencies backed by Central Banks. Much is expected of the crypto scheme in general, either for native currencies such as Bitcoin or the tokens of central banks.