"Cryptocurrencies act as money, at best, only for some people and to a limited extent, and even then only in parallel with the traditional currencies of the users," he says. "The short answer is they are failing."
Referring to the extreme volatility in virtual currency markets, Carney says: "The prices of many cryptocurrencies have exhibited the classic hallmarks of bubbles including new paradigm justifications, broadening retail enthusiasm and extrapolative price expectations reliant in part on finding the greater fool."
The Bank of England's Financial Policy Committee is currently considering the risks posed to UK financial stability by the proliferation of virtual currencies. And internationally the Financial Stability Board (FSB), which Carney chairs, will report to the G20 in Argentina later this month on the financial stability implications of crypto-assets.
Carney says that financial policymakers need to decide whether to isolate, regulate or integrate crypto-assets and their associated activities.
"Isolation risks foregoing potentially major opportunities from the development of the underlying payments technologies," says Carney. "A better path would be to regulate elements of the crypto-asset ecosystem to combat illicit activities, promote market integrity, and protect the safety and soundness of the financial system."
He says the time has come to hold the crypto markets to the same standards as the rest of the financial system.
"In my view, holding crypto-asset exchanges to the same rigorous standards as those that trade securities would address a major underlap in the regulatory approach. And as the SEC and FCA have argued forcefully, so-called initial coin offerings will not be allowed to use semantics to avoid securities laws designed to protect retail investors in particular."