On February 19, 2021, the governor of the Bank of England, Andrew Bailey, gave a speech regarding the use of cryptocurrencies. Summary of his main points is as follows:

Firstly, Bailey expressed his belief that cryptocurrencies hold no intrinsic value. He emphasized that they are not backed by any physical asset and therefore, they are not a form of money in the traditional sense. However, he also acknowledged that people still trade cryptocurrencies and invest in them, which is a risky behavior.

Secondly, he spoke about the potential risks associated with the use of cryptocurrencies. Bailey suggested that cryptocurrencies can be used for illicit activities such as money laundering, tax evasion, and illegal transactions. Additionally, he pointed out that cryptocurrencies are not subject to the same regulatory standards as traditional currencies, making it challenging to protect investors from fraud or cybercrime.

Thirdly, Bailey highlighted the challenges in adopting cryptocurrencies as a widely accepted form of payment. He stated that cryptocurrencies have limited scalability and slow transaction processing speeds, which make them impractical for use in everyday transactions. Besides, there are concerns about the environmental impact of cryptocurrencies since they consume a lot of energy during mining and transaction processing.

Fourthly, Bailey pointed out that central banks are exploring the use of digital currencies, also known as Central Bank Digital Currencies (CBDCs). He explained that CBDCs are different from cryptocurrencies as they are backed by the central bank and operate within the traditional banking system. CBDCs could provide benefits such as increased financial inclusion, reduced transaction costs, and improved resilience of the financial system.

Lastly, Bailey called for caution when it comes to investing in cryptocurrencies. He emphasized that investors should be aware of the potential risks and should not invest more than they can afford to lose. He also stated that the Bank of England has been working with other international central banks to monitor the developments in the cryptocurrency market and evaluate their potential impact on the financial system.

In conclusion, Bailey's speech indicates that the Bank of England is taking a cautious approach towards cryptocurrencies. While acknowledging the potential of digital currencies to disrupt traditional banking, Bailey emphasized the need for careful regulation and monitoring to prevent potential risks to consumers and the financial system. As the use of cryptocurrencies continues to grow, it will be interesting to see how central banks such as the Bank of England continue to engage with this rapidly evolving market.