The Bank of England‘s top official warns that crypto’s increasing integration into the established financial sector is a threat to our economy. As the assets get further interconnected with the broader economy, they may pose a risk to UK financial stability.
Sir Jon Cunliffe, deputy governor of the Bank of England (BoE), has warned that the rapid growth of cryptocurrencies could pose a serious threat to the established financial system.
The comments came in the context of an explosion in the global crypto market, which gathered $2.7tn in November. In the UK, an estimated 2.3m people hold digital assets, with an average of £300 per person.
While acknowledging that cryptocurrencies such as Bitcoin are increasingly becoming mainstream, Cunliffe noted that the majority of the risk stems from the volatility of digital assets.
In case the value of assets plummets sharply, Cunliffe believes the onus will be on the institution to contain the effects. To mitigate the risk, he suggests enacting standard regulations governing the sector.
Their price can vary quite a bit and theoretically or practically drop to zero. A major price correction could affect other markets and affect established financial market players when they get integrated into the financial system. “We are not there yet, but establishing standards and regulations takes time,” he said.
According to Cunliffe, the regulatory community is drafting standards domestically and internationally. In addition, he noted that fund managers are exploring whether they can include cryptocurrencies in their portfolios. Cunliffe recommended regulations as a way to be prepared for future growth
The Bank of England’s top official warns that crypto’s increasing integration into the established financial sector is a threat to our economy. As the assets get further interconnected with the broader economy, they may pose a risk to UK financial stability.
Sir Jon Cunliffe, deputy governor of the Bank of England (BoE), has warned that the rapid growth of cryptocurrencies could pose a serious threat to the established financial system.
The comments came in the context of an explosion in the global crypto market, which gathered $2.7tn in November. In the UK, an estimated 2.3m people hold digital assets, with an average of £300 per person.
While acknowledging that cryptocurrencies such as Bitcoin are increasingly becoming mainstream, Cunliffe noted that the majority of the risk stems from the volatility of digital assets.
In case the value of assets plummets sharply, Cunliffe believes the onus will be on the institution to contain the effects. To mitigate the risk, he suggests enacting standard regulations governing the sector.
Their price can vary quite a bit and theoretically or practically drop to zero. A major price correction could affect other markets and affect established financial market players when they get integrated into the financial system. “We are not there yet, but establishing standards and regulations takes time,” he said.
According to Cunliffe, the regulatory community is drafting standards domestically and internationally. In addition, he noted that fund managers are exploring whether they can include cryptocurrencies in their portfolios. Cunliffe recommended regulations as a way to be prepared for future growth.
