Bank of England; “Crypto threatens financial stability”

Sir Jon Cunliffe of the Bank of England has urged UK lawmakers to think “very hard” about the disruptive factor cryptos could create relative to traditional finance.

Growth of crypto is an ‘urgent matter’

According to Sir Jon Cunliffe, the deputy governor for financial stability at the Bank of England, crypto could pose an immediate threat to the traditional financial system.

During an interview Monday with the BBC Today programme, argued Cunliffe that the rapid growth of digital assets and their integration with traditional financial services could soon pose systemic risks. He stated:

“Cryptocurrencies are growing very fast and are becoming more and more integrated with the traditional financial system. So the point where they pose a risk is getting closer and closer. I think regulators and legislators should think very carefully about that,” he added.

Cunliffe warned against integrating volatile crypto assets into the mainstream financial system. However, he dismissed adjacent concerns regarding the rise of stablecoins.

Cunliffe’s comments come about a month after he addressed the Society for Worldwide Interbank Financial Telecommunication on Oct. 13. Here he called on policymakers to pursue crypto regulation as an “urgent matter”.

Despite the fact that “crypto technologies offer the prospect of radical improvements in financial services,” Cunliffe argued that the sector poses significant risks due to price volatility, a lack of consumer protection laws and the lack of anti-money laundering provisions in the DeFi sector.

“How great those risks can become will depend in large part on the nature and speed of response from regulatory and supervisory authorities,” Cunliffe said.

No decision yet on British CBDC

The Bank of England and the Treasury Department released a joint statement on 9 November. It outlines the upcoming research on a central bank digital currency (CBDC) for the UK market.

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The duo will meet in 2022 to assess the viability of a digital currency in the UK. They will also examine possible design features and consider the positive and negative implications of issuing a digital currency.

The Bank of England added that “no decision” has been made at this stage to launch a digital currency.

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