Bank of England Deputy Governor calls for crypto regulation
By Bob Garcia
In a lengthy speech at Sibos 2021 on Wednesday, Jon Cunliffe, who serves as the Deputy Governor of the Bank of England, warned the public about a possible collapse in the cryptocurrencies. The Deputy Governor also called for regulation in the crypto space to mitigate the possibility of a crash, would could spread to the entire financial system.
Speaking about the rise of digital assets in the United Kingdom, Cunliffe noted,”Cryptoassets have grown by roughly 200% in 2021, from just under $800 billion to $2.3 trillion today. They have grown from just $16 billion 5 years ago. $2.3 trillion of course needs to be seen in the context of the $250 trillion global financial system. But as the financial crisis showed us, you don’t have to account for a large proportion of the financial sector to trigger financial stability problems – sub-prime was valued at around $1.2 trillion in 2008″
Given the rapid growth of the cryptocurrencies in the UK and across the globe, as well as the fact that the space is mostly unregulated, Cuncliffe compelled authorities to take notice.
Commenting on the role of governmental regulatory authorities, Cunliffe said, “They have to think very carefully about what could happen and whether they, or other regulatory authorities, need to act.” He clarified, “At the same time, they need to be careful not to over-react – particularly when faced with the unfamiliar. We should not classify new approaches as ‘dangerous’ simply because they are different. Innovation, technology and new players can tackle longstanding frictions and inefficiencies and reduce barriers to entry. Throughout history, they have been key to driving improvement and to increasing resilience in financial services.”
Even as Cuncliffe acknowledged the potential for crypto to vastly improve the world of finance, he suggested it is foolish to ignore the risks, no matter how limited they are, especially as leveraged asset holders dominate the unregulated cryptocurrency space.