Carney joined a chorus of concern among global policymakers over the rise of digital currencies, saying authorities needed to prevent their use by criminals and new rules were needed to treat them like other assets.
During a speech at the inaugural Scottish Economics Conference on March 2, 2018 Governor of the Bank of England Mark Carney warned of the financial risks of purchasing and owning cryptocurrencies, and discussed how they are becoming an increasingly large threat to financial stability in the UK.
Carney, who also heads the Financial Stability Board, an worldwide financial regulator, also warned individual investors over major risks in connection with trading the virtual assets.
The BOE's Financial Policy Committee is now considering the impact of cryptocurrencies on United Kingdom financial stability, although Carney said he personally does not see any material risks.
"Crypto has the potential to be hugely disruptive to the major financial centers, which is partly behind the heavy-handed response from Mark Carney".
However, the governor insisted that, in his view, crypto-assets do not "appear to pose material risks to financial stability". They are small now but they are getting bigger.
"In comparison, at the height of the dotcom mania, the valuations of technology stocks were closer to about a third of global GDP".
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"In addition, major United Kingdom financial institutions have minimal exposures to the crypto-asset ecosystem". However, such risks may grow as retail adoption of bitcoin expands and traditional institutions lag behind on improvements to their systems.
Carney also outlined some of the potential advantages of cryptocurrency, the underlying technologies of which he described as "exciting".
"There are too many crypto/tokenised "solutions" being crow-barred into "problems" that do not exist", Clarence-Smith said.
His warning comes amid growing efforts around the world to bring bitcoin under the control of central banks and governments, amid fears of consumers losing money at the hands of market manipulation.
Carney says that financial policymakers need to decide whether to isolate, regulate or integrate crypto-assets and their associated activities.
He said: "Appropriate regulation would for the first time offer legal and regulatory protection to individual investors and high street customers seeking to benefit from the opportunities presented by cryptocurrencies, and the underlying blockchain technology".
The Bank chief also conceded that the distributed ledger technology which underpins cryptocurrencies can act to help the way payments are made evolve.