Jon Cunliffe, Deputy Governor at Bank of England, recently stated that the threats cryptocurrencies pose for the financial sector are becoming more apparent. He called on regulators to act before such an economic risk can manifest in traditional markets.
Crypto threatens the financial industry
On Monday, the governor spoke out in conversation with BBC’s Today Programme. He expressed concern that volatility in cryptocurrency markets could spill over into traditional financial markets. He stated that the risk was “getting closer” to regulators and encouraged them to “think very carefully” about it.
He said that although they are not a financial stability risk at the moment, they are growing rapidly and becoming more integrated into what I would call the traditional financial system.
Cunliffe is not the first to present this case. He argued last month that crypto markets were large enough to send shocks through the rest of financial system in the case of a crash. The industry is larger than ever with a recent $3 trillion market cap.
The Financial Conduct Authority in the United Kingdom has yet to provide sufficient protections for cryptocurrency users. This includes regulations for crypto ads such as those that appeared on London’s public transport last month. Local authorities have recently banned these ads. However, this is not the only action taken.
The governor is less concerned with private-issued cryptocurrency, like Meta (formerly Facebook’s Diem). They have not yet been adopted in mass quantities, so regulatory action is not necessary.
Jon Cunliffe. Source: The Times
Potentials of a CBDC for Britons
The Bank of England decided to not choose cryptocurrencies and instead has been consulting a variety of experts about the development of a CBDC, also known as “Britcoin”. However, this product won’t launch until at least 2025 according to policymakers. In 2022, the bank will host a consultation about the project. Then, it will provide a technical explanation of its structure.
Cunliffe stated that the CBDC would be fully controlled and tied to sterling to reduce volatility. He called this “the most secure form of money”.
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