Jon Cunliffe, the deputy governor for the financial stability of the United Kingdom’s central bank, the Bank of England (BoE), talked about the impact of cryptocurrency on bank credit issuance, i.e., how the crypto economy could end banks credit services. Cunliffe discussed the correlation between crypto and credit services in a speech he delivered at the London School of economics,
Cunliffe in the speech took a major stand on the growing central bank digital currency (CBDC) and crypto issue warning that if cryptocurrencies begin to rule the economy, credit services offered by banks and other financial institutions may be eliminated.
The BoE deputy governor predicted that if the crypto economy evolves and stablecoins like the proposed Libra are integrated into people’s social media accounts, much of their money kept in banks are going to be moved into their social media wallets.
Cunliffe, while analyzing the impact of cryptocurrency on bank credit issuance, said that after people’s money are kept in their stablecoin wallets, credit services to the real economy provided by banks would become weaker or can even cease to exist. He said that if it gets to that, it would be a development with profound economic consequences turning the world towards the crypto economy.
However, the mandate of Bank of England, as explained by its envoy to the European Union, is to make sure that the United Kingdom’s money works safely and reliably. The digital assets that are set to take over pose several questions to be answered by the government, regulators, and the Bank of England.
Cunliffe further asks stakeholders and relevant government agencies to be ready for the new challenge the crypto ecosystem will bring before it becomes crucial in the system.
Imminent crypto economy risks stablecoin pose
Although the Bank of England agrees that the evolving crypto economy and digital assets come with many advantages, reduced cost of international payment, greater financial inclusion for the unbanked, and many more and is an upgrade to the banking system of the 19th century.
The evolving digital asset set to rule the economy requires that regulators get prepared for them before they become essential to people. Using Facebook as an example, Cunliffe said with its proposed Libra, and several people could quickly adopt it such that it becomes a necessity in many people’s lives in little or no time.
However, Cunliffe reveals that with regards to the crypto economy, the Financial Stability Board will send a report containing regulatory recommendations as regards these digital assets in some months’ time.
Featured Image by Pixabay