The Bank of England has revealed that it is working on sketching a regulatory framework for crypto assets, according to statements stemming from the central bank’s Financial Policy Committee on Thursday.
BOE Stresses Crypto Assets need effective public policy frameworks
The Bank of England (BOE), told journalists on Thursday that the bank is working out the regulatory framework to regulate digital currencies. The BOE statements derive from the central bank’s Financial Policy Committee (FPC) and the bank mentioned sanctions tied to the ongoing Russia-Ukraine war. Financial regulators around the world have expressed concern that Russia might bypass economic sanctions by using crypto assets.
“While crypto assets are unlikely to provide a feasible way to circumvent sanctions at scale currently, the possibility of such behaviour underscores the importance of ensuring innovation in crypto assets is accompanied by effective public policy frameworks to… maintain broader trust and integrity in the financial system,” the BOE press statement mentioned on Thursday.
BOE Says Crypto Assets Could ‘Present a Number of Financial Stability Risks,’ Central Bank Is Concerned About Stablecoins
The cryptocurrency economy has been criticized by members of the BOE for a long time. Andrew Bailey (the governor of the Bank of England) raised concern about El Salvador legalizing bitcoin in South America. The following month in December, Sir Jon Cunliffe, the BOE’s deputy governor for financial stability, said that crypto asset prices could drop to zero.
FPC’s Thursday report mentions financial stability. “The FPC continues to judge that direct risks to the stability of the UK financial system from crypto assets are currently limited, reflecting their limited size and interconnectedness with the wider financial system,” the central bank’s committee noted. Further, the FPC added:
But, crypto assets may present financial stability risks if their growth rate continues and they become increasingly interconnected to the financial system.
The Russia-Ukraine conflict has seen politicians from all over the globe discussing, proposing and even implementing legislation that would regulate digital currency research and regulation. The BOE also wants crypto assets to be under the same regulatory umbrella that traditional financial assets, according to statements made at the FPC meeting.
The FPC also discussed stablecoins and how a large one that does not have a deposit guarantee can pose a risk to the financial system. “The FPC judges that a systemic stablecoin that is backed by a deposit with a commercial bank would introduce undesirable financial stability risks,” the committee added.
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