BOE Warns Of Difficulties In The Crypto Market

In addition to stressing the need to strengthen regulatory and enforcement frameworks, the Bank of England (BOE) also warned of more pain in the cryptocurrency market.

According to the Bank of England, difficulties still pile up for both the traditional and digital currency markets.

In a report released on Tuesday, the Bank of England’s Financial Policy Committee said the deteriorating economic outlook has caused volatility in the markets in recent months, pushing up the prices of financial assets. Risky assets like stocks and cryptocurrencies plummeted.

According to the report, while the crypto downturn revealed a number of vulnerabilities that did not pose a risk to overall financial stability, it did show the need for stricter regulation and enforcement.

The BOE further explained that if the popularity and correlation of cryptocurrencies with the traditional financial system continue to grow, the broader economy may face systemic risks. According to the central bank, this highlights the need for an “enhanced regulatory and enforcement framework” to manage developments in these markets and activities.

While the BOE calls for stricter crypto regulation, they are not proposing any new rules for traditional assets like stocks. Notably, the equity market has lost more than $11 trillion since the start of the year, about 3.6 times the total crypto market value at its peak.

Shares of many blue-chip tech companies such as Meta, Netflix, PayPal, and Shopify, are down a brutal 52.7%, 69.8%, 63.3%, and 77% year-to-date without attracting any regulatory attention. Meanwhile, Bitcoin is down about 55% over the same period.

Although the market has corrected significantly, the BOE emphasized that the difficulty for stocks and cryptocurrencies may not be over yet.

“Given downside risks from additional supply shocks, faster-than-expected monetary policy tightening, and slower-than-expected economic growth, the risky asset remains vulnerable to further sharp adjustments.”

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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Harold

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