Mark Carney

During the Economic Policy Symposium in Jackson Hole, Wyoming, Bank of England Governor Mark Carney proposed that a central bank-supported digital currency could potentially replace the U.S. dollar as the global reserve currency. He argued that the current international monetary and financial system, dominated by the dollar, creates significant global economic vulnerabilities. The dollar’s dominance, he noted, often leads to spillover effects from U.S. economic policies that impact other countries, especially in an era of heightened globalization and trade disputes.

Carney suggested a "Synthetic Hegemonic Currency" (SHC), potentially managed by a coalition of central banks, as an alternative to the dollar. This digital currency would be backed by a basket of national currencies and could reduce global reliance on the dollar, which currently serves as the primary currency for international transactions and securities issuance. Carney explained that digital technology could disrupt the dollar’s dominance by enabling faster, lower-cost payments, which he indicated as necessary for a more stable international monetary system.

While Carney did not directly endorse cryptocurrencies, he acknowledged their role in driving innovation in payments. He referenced Facebook's Libra project as an example of how stablecoins could change the payments landscape but stressed that regulatory frameworks would need to be established well before such systems could launch. Carney concluded that an SHC could offer a balanced approach to managing global economic risks, potentially easing the disproportionate influence of the dollar and providing a more resilient framework for international trade.

Carney stated he had an "open mind" regarding Facebook's digital currency, Libra, but emphasized it would not have an “open door” to launch without meeting stringent regulatory standards. Speaking at a conference in Portugal, Carney highlighted that if Libra attracted significant users, it would become “systemic” and thus subject to the highest levels of regulation. He underscored that the Bank of England, along with other international bodies like the G7 and IMF, would closely scrutinize Libra’s impact on financial stability, focusing on areas such as cyber resilience, anti-money laundering, data privacy, and ensuring an open platform for competition.

In a letter to G20 Finance Ministers and Central Bank Governors, Mark Carney, as Chair of the Financial Stability Board (FSB), addressed the rapid growth of crypto-assets. He indicated that, while crypto-assets did not yet pose risks to global financial stability due to their relatively small size compared to the overall financial system, the FSB was vigilant about potential risks. Specifically, Carney noted that crypto-assets constituted less than 1% of global GDP, which was small compared to other pre-crisis financial products.

Carney also highlighted the possibility of evolving risks as crypto-assets gained wider adoption or became more integrated with the traditional financial system. He mentioned that increased use without improvements in market integrity, consumer protection, and cyber resilience could lead to financial stability concerns. Therefore, the FSB planned to monitor crypto-assets closely by identifying key metrics and addressing data gaps, in coordination with international organizations such as the IMF and the Financial Action Task Force (FATF).

Additionally, Carney acknowledged both the consumer protection issues linked to crypto-assets and their potential to improve financial system efficiency. He underscored the importance of international coordination in managing crypto-asset risks, given the global nature of these markets.

In The Future of Money, delivered at the Scottish Economics Conference, Mark Carney provided insights into the implications of cryptocurrencies and the potential for CBDCs. He acknowledged the disruptive influence of cryptocurrencies like Bitcoin, which emerged from distrust in traditional financial institutions during the 2008 crisis. Despite their popularity, Carney critiqued cryptocurrencies for being poor stores of value, inefficient mediums of exchange, and virtually unused as units of account. He highlighted their extreme volatility and lack of intrinsic value, which make them unsuitable as reliable money.

Carney discussed regulatory challenges, suggesting that while crypto-assets pose minimal risks to financial stability due to their small scale, issues like money laundering and terrorism financing require urgent attention. He advocated for a regulatory framework to ensure crypto-assets meet the same standards as other financial assets, particularly in areas of market integrity and consumer protection. Carney also hinted at the potential benefits of blockchain technology, which underpins cryptocurrencies, for enhancing transparency, efficiency, and resilience in financial systems.

On the future role of central banks, Carney explored the possibility of a CBDC that could leverage the advantages of cryptocurrencies while providing the stability of fiat currencies. However, he noted that technological and policy challenges, including impacts on traditional banks and issues surrounding privacy and data use, make a widely accessible CBDC a distant prospect. Meanwhile, Carney emphasized the Bank of England's efforts to modernize its Real-Time Gross Settlement (RTGS) system to support innovations in digital payments and improve financial system resilience, including exploring compatibility with distributed ledger technology for enhanced efficiency and security in settlements.

Bank of England Governor Mark Carney stated that Bitcoin, despite its dramatic price increases, did not pose a threat to global financial stability. Addressing British lawmakers, he characterized Bitcoin's volatility as an "equity-type risk" rather than a systemic financial concern, indicating that the cryptocurrency's fluctuations were notable but not destabilizing on a broader scale. Carney’s perspective was that Bitcoin did not yet merit categorization as a financial stability issue, largely due to its limited integration into the formal financial system at the time.

Speaking at a G-20 conference on finance and digitalization, Carney emphasized that DLT could revolutionize key banking processes, including payments, clearing, and settlement, by enhancing efficiency, accuracy, and security. He highlighted that this technology could lead to substantial capital savings and improved resilience across the financial system, suggesting a future where settlement systems are increasingly streamlined and compliant.

Carney also addressed the potential impact of DLT on CBDCs, pointing out both benefits and challenges. He noted that CBDCs could offer direct public access to a "risk-free" asset but warned that such access might sharply increase liquidity risks for traditional banks, potentially disrupting the existing financial system.