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16 Nov, 2021 13:59

UK warns of imminent danger of crypto

UK warns of imminent danger of crypto

The rapid growth of digital assets and their integration with traditional financial services could soon pose systemic risks, according to Bank of England (BoE) Deputy Governor Jon Cunliffe.

He told the BBC that cryptocurrencies may pose an imminent threat to the traditional financial system. “[Cryptocurrencies] are growing very fast, and they’re becoming integrated more into what I might call the traditional financial system,” Cunliffe said, adding “So, the point at which they pose a risk is getting closer. I think regulators and legislators need to think very hard about that.”

The deputy governor acknowledged that “crypto technologies offer a prospect of radical improvements in financial services,” but argued that the sector poses significant risks through price volatility, a lack of consumer protection laws, and the absence of Anti-Money Laundering provisions in the decentralized finance sector.

“How large those risks could grow will depend in no small part on the nature and on the speed of the response by regulatory and supervisory authorities,” he said. 

In October Cunliffe called on policymakers to pursue crypto regulation as a “matter of urgency.” 

The BoE and the Treasury this month released a joint statement on the upcoming research into the UK’s central bank digital currency (CBDC). They plan to explore potential design features, and consider the positive and negative implications of issuing a CBDC. “No decision” has been made to launch a CBDC at this stage.

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