Saturday 16 December 2017

Central Bank getting 'up the curve' to understand Bitcoin

Bank of England’s Andy Haldane says there’s a ‘trust deficit’ surrounding the entire financial system, including central banks
Bank of England’s Andy Haldane says there’s a ‘trust deficit’ surrounding the entire financial system, including central banks
Ellie Donnelly

Ellie Donnelly

The Central Bank is examining the potential risks posed by virtual currencies and exchange-traded funds (ETFs), an increasingly popular type of investment portfolios traded over stock markets, according to Gerry Cross, director of policy and risk at the regulator.

"We need to think carefully and well about the unseen underwater connections and dynamics, the bits that aren't obvious," he said at a Bloomberg event in London.

The comments aren't a prelude to immediate regulatory action, however.

The Central Bank is weighing whether it needs to do something, whether the market is looking after itself, or whether "you just need to keep watching it and make sure you're in a position to react" if something happens, Gerry Cross said.

In relation to Bitcoin, the virtual currency that can be used to make digital payments and is unconnected to any regulatory oversights, Irish authorities are "getting up the curve" of understanding, he said.

Bitcoin and payments systems made and managed by technology firms rather than traditionally regulated banks are changing the nature of financial transactions, and regulators everywhere are struggling to catch up.

In the UK, Bank of England chief economist Andy Haldane said yesterday that the global financial crisis may have eroded trust in the financial system and its institutions for good,

That in turn has implications for adoption on new and rival technologies.

The 2007-09 crisis had been "hugely trust-busting", dragging banking and public institutions into disrepute, Mr Haldane told a London audience at the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA).

"Even as the scars of the crisis heal, this trust deficit might not repair itself naturally... (and) may be not cyclical, not temporary, but permanent," he said.

"If that's true, it strikes me as plausible, then those of us in financial services - including central banks - will really have to go some to repair that deficit," he added.

A report by public relations firm Edelman this year showed Britain ranked near the bottom for public trust in institutions.

A recent Bank of England survey of the public conducted by TNS showed it had a net satisfaction rating of 24pc for its handling of interest rates - the lowest in almost four years and a far cry from its pre-recession average of 43pc. (Additional reporting Bloomberg/Reuters)

Irish Independent

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Promoted Links

Also in Business