Mark Carney, the governor of the Bank of England (BoE) has surprised some people with his recent address at the Federal Reserve meeting in Wyoming. The Canadian banker who heads up one of the oldest central banks, suggested that the dollar should lose its status as the global reserve currency and be replaced by a digital currency.
As CCN says, “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.”
The Guardian reported 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.”
Carney has previously said that cryptocurrencies do not pose a threat to the global financial system, something that sets him apart from other heads of central banks. He is certainly ore crypto-friendly than many of them.
However, as CCN points out, Carney’s enthusiasm doesn’t mean that he thinks the dollar should be replaced by bitcoin. He isn’t a big fan of unregulated cryptocurrencies, and other central bankers are also wary of them, because they cannot control the cryptocurrency because of its decentralized nature, and hence cannot manipulate it.
Central banks are working on their own digital currency concepts, China’s PBoC being the one that appears to be closest to launching one. It is very likely that the alternative to the dollar that Carney has in mind will be a stablecoin backed by the BoE, and other central banks. However, it’s a significant announcement for the development of the crypto market overall.