Bank of England’s deputy governor for financial stability, Sir Jon Cunliffe, has warned that cryptocurrency is getting closer to posing a threat to global financial stability due to the sector’s rapid growth. It is being integrated in the financial system rapidly at an even faster rate than traditional banking. He calls on regulators to act now.
Bank of England’s Jon Cunliffe Warns Crypto Is Closer to Becoming a Threat to Global Financial Stability
Sir Jon Cunliffe, Bank of England’s deputy governor for financial stability, talked about bitcoin and cryptocurrencies in general on BBC’s Today program Monday.
Cunliffe warned that cryptocurrency, such as bitcoin, is becoming more dangerous for global financial stability because of their rapid growth. Cunliffe stated:
My judgement is they’re not, at the moment, a financial stability risk, but they are growing very fast, and they’re becoming integrated more into what I might call the traditional financial system.
The Bank of England official warned that crypto assets’ volatility could soon spill over into traditional markets. The Bank of England official urges regulators for action.
They are getting closer to the risk threshold. Legislators and regulators should think hard about this.
In July, Cunliffe said that crypto assets were “not of the size that they would cause financial stability risk, and they’re not connected deeply into the standing financial system.”
On Monday, he also said that Meta (formerly Facebook) is launching its own stablecoins such as Diem. “There are proposals for new players who are not banks, including some of the big tech platforms and some of the social media platforms, to come into the world and issue their own money. But I think that those proposals don’t yet exist at scale, so I don’t think we’re behind the curve here,” Cunliffe opined.
The central bank’s digital currencies (CBDCs) were also mentioned by the deputy governor of financial stability. “The reason why we might consider, why we’re actively exploring introducing the digital pound, digital form of Bank of England cash, is that the way we live and the way we transact is changing all the time,” he described.
“The question is whether the public at large, businesses and households, should really have the option of using and holding the safest form of money — which is Bank of England money — in their everyday lives. That’s the question that we’ll explore in this taskforce between the Treasury and the Bank of England over the next year,” he added.
Cunliffe warned in October that crypto might collapse due to the lack of intrinsic value, extreme volatility, and low price. Cunliffe then called on regulators to quickly establish rules for crypto assets.
The Bank of England also issued a report in October stating that crypto assets pose “limited” direct risks to the financial stability of the U.K.’s financial system. “Cryptoasset and associated markets and services continue to grow and to develop rapidly. These assets are increasingly being integrated in the financial system. FPC [Bank of England’s Financial Policy Committee] judges that direct risks to the stability of the U.K. financial system from cryptoassets are currently limited.”
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