Bank of England calls crypto a threat to financial stability

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TL;DR Breakdown

  • Bank of England says crypto are a threat.
  • Executive says no need to worry about stablecoins.
  • Calls on policymakers to pursue crypto regulation.

Sir Jon Cunliffe, a deputy governor at the Bank of England has pointed series of red flags about cryptocurrencies as he described it as a threat to financial stability.

The deputy governor spoke on Monday during an interview with British Broadcasting Corporation (BBC).

The Bank of England executive argued that the rapid growth of digital assets and their integration with traditional financial services could soon pose systemic risks. He called on regulators and legislators to think “very hard” about the disruption integrating cryptocurrency with traditional finance could wreak.

“[Cryptocurrencies] are growing very fast, and they’re becoming integrated more into what I might call the traditional financial system.”
“So the point at which they pose a risk is getting closer. I think regulators and legislators need to think very hard about that,” he added.

Bank of England Cunliffe satisfied with stablecoin

Despite his fear and worry that integrating volatile assets would pose a threat to financial stability, he dismissed concerns about rise of stablecoins.

“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,” he said. “I think that those proposals don’t yet exist at scale, so I don’t think we’re behind the curve here.

Cunliffe other worries on cryptocurrencies

It is not the first time the Bank of England deputy governor expressed worry about cryptocurrencies.

Last month, he appeared before the Society for Worldwide Interbank Financial Telecommunication on Oct. 13 and called on policymakers to pursue crypto regulation as a matter of urgency.

He, however, acknowledged the prospects crypto brings to the world and improvement they bring to financial services but called for its regulation.

Cunliffe argued that the sector poses significant risks through price volatility, a lack of consumer protection laws, and the absence of anti-money laundering (AML) provisions in the DeFi sector.

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