From Stingy Mates to Short Memories: Carney's Best Bitcoin Bits

(Bloomberg) -- As Bank of England Governor Mark Carney laid out his call for greater regulation of cryptocurrencies Friday, he also gave some insight into his thoughts on the opportunities the technology brings, and theories behind it recent rise.

Here are some of his highlights from Carney’s speech and TV interview at Bloomberg’s London office.

Nowhere to Hide for Stingy Mates

One casualty of a boom in digital and peer-to-peer payment methods could be stingy drinkers in pubs and bars. Carney said the rise of crypto-currencies are throwing down the gauntlet for where the mainstream system needs to go, making direct payments to friends and business far easier.

That could spell trouble the next time the governor tries to dodge a round:

“I can’t hide in the pub. I won’t have the excuse of, my usual I left my wallet in my other coat. I’ll have to say I left my phone in the other coat.”

Short Memories, Millennials and Bubbles

Risk-taking spurred by short financial memories may help explain the rise of cryptocurrencies and the surge in Bitcoin last year.

“Memory, particularly financial memory, tends to be seven to eight years and then pain of previous experiences reduces, certainly in professional financial markets -- logically it doesn’t make sense but that’s what tends to happen.”

He added that a lot of the surge into these assets has been a different generation, for whom “the investment case makes sense with the way they live.”

“That generation doesn’t have that memory of the crash. When I go to universities, you might as well be talking about the Great Depression when you talk about 2008. For me it was yesterday, but it’s a long time.”

Last In, Biggest Pain

The governor also expressed concern that those who have arrived later to the crypto party could feel the most pain, and said he hoped people were only committing a “small proportion” of their wealth to digital currencies.

“It’s not our job to save people from themselves, but you worry about people who get caught up in anything where you have extrapolative behavior -- a bubble. People who come in later, who come in with all of their net worth -- they pay the heaviest price unfortunately.”

Race to the Top

While Carney called for crypto-asset exchanges to be regulated, many marketplaces are expected to remain outside the jurisdiction of the U.S., the EU, and other major nations. The governor suggested that as many big exchanges are integrated into the financial system they will garner a competitive advantage over outlaw bourses because they can reassure their customers they are not fraudulent and can safeguard their crypto holdings. 

“The best of the cryptocurrencies will gravitate to the best of the exchanges, if they are regulated, and others will fall by the wayside.,” he told Bloomberg in an interview. “That’s a good thing, that’s a level playing field.”

Hope for Bulls

The sector’s bulls can take some heart from his speech. Carney conceded that cryptocurrencies “point the way in many respects to the future of money,” and that it throws “a challenge to central banks, and those in charge of payments, of how to recognize those to better serve customers.”

©2018 Bloomberg L.P.