Sir Jon Cunliffe, deputy governor for financial stability at the Bank of England, said the risks posed by digital assets such as Bitcoin are drawing nigh. He’s now petitioning financial regulators to take action on the rapidly growing sector.
The top Bank of England official fears that if cryptos aren’t nipped in the bud, their highly volatile nature will spill over into other traditional markets.
“My judgment 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”.
Cunliffe believes digital assets’ threat to financial stability is looming on the horizon. ”So the point at which they pose a risk is getting closer. I think regulators and legislators need to think very hard about that”.
Global regulators scrambling to introduce new laws
The Financial Conduct Authority (FCA) — and other financial regulators globally — have been, in the longest time, trying to introduce regulatory laws seeking to protect consumers and businesses from cryptocurrencies risks.
The influential Basel Committee gave assurances on revisiting proposals for banks engagement on regulations of cryptocurrencies. Also, the European Union has been petitioned to make “quick” decisions on updated cryptocurrency regulations.
Cunliffe hinted private digital assets such as Meta — previously Facebook, which leads the production of Diem (a stablecoin) — don’t need regulatory scrutiny at the moment.
“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”.
UK’s proposal for a digital sterling
The deputy governor’s comments come as the Bank of England is consulting with a host of experts, including tech firms and the city executives — and the Treasury — about developing a central bank digital currency (CBDC) for the UK market.
The UK is proposing the creation of a digital sterling — or the so-called Britcoin — to be used alongside bank deposits and physical cash for everyday spending.
But the Threadneedle Street policymakers quashed hopes for creating a CBDC, warning a digital currency won’t likely arrive before the second half of this decade. Thanks to developmental timelines and stringent considerations.
Next year (2022), the Bank of England plans to launch a consultation on the crypto project, followed by a technical explanation of the creation of a digital currency.
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