Crypto adoption in the financial sector poses a risk to the economy – BoE
A Bank of England bigwig has warned that the increasing integration of crypto into the established financial sector poses a threat to the economy.
Deputy governor for financial stability Jon Cunliffe warned that increasing numbers of banks and asset managers are entering the crypto space putting key economic players at risk from a crypto market crash. The comments come amid an explosion in the global crypto market which swelled to $2.7tn in November, an estimated 2.3m people in the UK hold digital assets with an average amount per person of £300.
“Crypto is a technology that is being used for lots of different things in the financial system, but the bulk…. are unbacked crypto assets that have nothing behind them and their price can vary very considerably,” said Jon Cunliffe while speaking on the BBC’s Today Programme.
“It’s starting to become integrated into what I call the established financial sector. Banks want to offer particular services and crypto asset managers want to know if they should be holding part of their portfolio in crypto,” he continued, saying that urgent regulation is needed as the market approaches the point where “a big price correction could really affect other markets and affect established financial market players.”
“We really need to roll our sleeves up and get on with it so that by the time this becomes a much bigger issue we’ve actually got the regulatory framework that can contain the risks,” Cunliffe added, stressing the need for urgent market regulation.
Cunliffe said that the regulatory community is in the process of drafting standards both domestically and internationally.
The comments come a day after the Bank of England published its December report on financial stability which said the rapidly growing crypto space posed “limited direct risks to UK financial stability.”