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Tuesday, July 16, 2024

Bank of England Says Crypto Growth Could Create a Systemic Risk

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The Bank of England’s deputy governor, Jon Cunliffe, has  poses a threat that cryptocurrencies could spark a global financial crisis unless tough regulations are introduced.

Cunliffe likened the rate of growth of the cryptoasset market, from $16 billion five years ago to $2.3 trillion today. It is still very tiny as compared to $250 trillion global financial system

As of 2021, the total number of crypto owners is over 300 million worldwide. And over 18,000 businesses worldwide are already accepting cryptocurrency payments

“You don’t have to account for a large proportion of the financial sector to trigger financial stability problems,” Bank of England Deputy Governor Jon Cunliffe said in a speech on Wednesday.

“When something in the financial system is growing very fast, and growing in largely unregulated space, financial stability authorities have to sit up and take notice.”

The comments mark a shift for the Bank of England, which along with other banking regulators has refushed digital currencies as assets without an intrinsic value that may go to zero. He also noted ways that the technology is providing a genuine service that are appealing to more investors.

Major banks are now offering crypto services and offering the assets to some wealth-management clients and these assets are handled by crypto hedge funds. Leading payment firms are more focused on stablecoins instead of high volatile coin.

These developments, Cunliffe said, are starting to integrate crypto assets into the financial system. crypto assets are starting to play role in the world economy and how that could infect other markets in a crisis. crypto owners see these assets as an alternative to mainstream investments instead of a gamble, and about half intend to invest more.

Cunliffe said. “Crypto technology enables — though it does not require — recording and transfer to take place without the banks or custodians that have historically carried out this function.”

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