Cryptos are not yet a big enough risk to the financial stability, the Deputy Governor of the Bank of England, Jon Cunliffe, said on Wednesday.
The speculative boom of crypto is very noticeable. But he doesn’t think that it can cross the boundary for causing financial instability risk. The price value of bitcoin and other cryptocurrencies has surged since the starting of this year. It became nearly $2.5 trillion in the market. The backers of bitcoin are claiming that it could offer an alternative store for value saving when value savers are struggling to find a yield due to an ultra-low interest rate.
However, cryptos are very volatile. The market has lost more than $1 trillion in value since May. Bitcoin has fallen from forming a record high of $65000 to the lower, around $32500.
The regulators have been sensing an alarm for crypto. China has sought a crackdown in the crypto industry with its series of measures. It has weighed on the sentiment of investors in recent weeks.
Binance, which is the largest crypto exchange in the world, was also banned from its operations in the UK due to the watchdog. Along with many other exchanges, Binance has also failed to register along with the regulator due to not meeting the requirements for anti-money laundering.
Cunliffe said that crypto speculations are mainly limited to retail investors now. It is reiterating the position of the central bank that people who are investing in digital TV assets must be prepared to lose it all.
There are issues in investor protection, and these are highly speculative. But they are not of the size that they would cause instability in the financial state. The cryptos are not deeply connected with the standing system of finance.
Cunliffe said, “Were we to start to see those links develop, were we to start to see it move out of retail more into wholesale and see the financial sector more exposed, then I think you might start to think about risk in that sense.”
Bank of England’s official added that a distinction must be drawn between speculative cryptos like bitcoin and stable coins. Cunliffe said that he thinks stablecoins should come under the terms of regulatory supervision.
“I think the international community needs to at least be developing standards to be able to distinguish but also to have regulatory standards for that sort of product,” he said.
It comes forward as several central banks in the world, including the Bank of England, is exploring digital currencies on their own due to the increasing interest in crypto.