Mark Carney, governor of the Bank of England (BOE), has a plan to challenge the dollar’s dominance. | Source: Photo by Chris J Ratcliffe / POOL / AFP
By CCN Markets: Mark Carney wants the US dollar to lose its status as the global reserve currency, pitching the idea that a digital currency could take its place at the Federal Reserve’s annual meeting in Jackson Hole, Wyoming. This is not the first time that someone is calling for the dollar to die and get replaced by a digital currency (such as bitcoin), but the fact that it comes from the Bank of England governor himself is a big deal.
“A digital currency “could dampen the domineering influence of the US #dollar on global trade”, #Carney said in a speech at the gathering of central bankers from around the world in Jackson Hole, Wyoming.” https://t.co/cCqJ05nzoS #crypto #bitcoin #banks #reservecurrency $USD
— Bart van Maarseveen (@bvanmaarseveen) August 24, 2019
Carney wants the dollar’s dominance to end
The Guardian reports that the Bank of England governor was addressing fellow central bankers when he said that dollar-hoarding by governments has led to a decade of ultra-low interest rates and low inflation. He believes that a new digital currency could knock the dollar off its perch. Carney said:
“The dollar’s influence on global financial conditions could similarly decline if a financial architecture developed around the new [digital currency] and it displaced the dollar’s dominance in credit markets. By reducing the influence of the US on the global financial cycle, this would help reduce the volatility of capital flows to emerging market economies.”
The statement from Mark Carney is not surprising. In his capacity as the former chair of the Financial Stability Board, Carney had said last year that cryptocurrencies do not pose a threat to the global financial system. This indicates that unlike many other central bankers, the Bank of England governor has a welcoming approach toward digital currencies such as bitcoin.
After all, the Bank of England has been known to explore ways to include blockchain technology and bank-run cryptocurrencies in the past.
But bitcoin bulls should take his comments with a pinch of salt as Carney’s comments don’t bode well for the flagship cryptocurrency.
Why bitcoin bulls need to be wary of Carney’s comments
Mark Carney’s proposal of a digital currency replacing the dollar doesn’t give bitcoin investors much reason to celebrate as the central banker is not a fan of unregulated cryptocurrencies.
Mark Carney, the governor of the Bank of England, said international scrutiny would be brought to bear on Facebook’s plans and that the BoE greeted the ambitions “with an open mind” but not “an open door.” $FB #Libra https://t.co/ZaenacwzPd
— Bruno J. Navarro (@Bruno_J_Navarro) June 19, 2019
Bitcoin has been bashed by central bankers across the globe for the very simple reason that they cannot control the cryptocurrency because of its decentralized nature, and hence cannot manipulate it.
So don’t think that Carney or any other central banker will shoot themselves in the foot by proposing bitcoin as an alternative to the dollar.
What’s worse for bitcoin is that central banks have been working on their own version of cryptocurrencies, or wish to explore this path in the future. So the possibility that one of them becomes an alternative to the dollar cannot be ruled out, as investors who are wary of bitcoin’s volatility might seek shelter in a stablecoin that’s backed by central banks.
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