Bank of England: Crypto Threat to Financial Stability ‘Getting Closer’

Sir Jon Cunliffe, the Bank of England’s deputy governor for financial stability, has warned that the sector’s fast development is putting global financial stability at risk. Cryptocurrency is also rapidly being absorbed into the traditional banking system. He calls on authorities to act immediately.

On Monday’s Today show, Sir Jon Cunliffe, the Bank of England‘s deputy governor for financial stability, discussed bitcoin and cryptocurrencies in general.

Because of their fast rise, cryptocurrencies such as bitcoin, he claimed, are on the verge of becoming a danger to global financial stability. Cunliffe stated,

My judgement is they’re not, at the moment, a financial stability risk, but they are growing very fast, and they’re becoming integrated more into what I might call the traditional financial system.

The Bank of England official cautioned that the volatility of crypto assets might soon spill over into regular markets. He calls on regulators to intervene, saying:

So the point at which they pose a risk is getting closer. I think regulators and legislators need to think very hard about that.

On Monday, he also revealed that firms like as Meta, previously Facebook, are introducing their own stablecoins, such as Diem. “There are proposals for new companies who are not banks, such as some of the major digital platforms and social media platforms, to enter the market and issue their own money.” But I believe such solutions do not yet exist at scale, so I do not believe we are behind the curve here,” Cunliffe stated.

The deputy governor for financial stability also shared his thoughts on central bank digital currencies (CBDCs): “The reason why we might consider, why we’re actively exploring introducing the digital pound, digital form of Bank of England cash, is that the way we live and the way we transact is changing all the time,” he described.

“The question is whether the public at large, businesses and households, should really have the option of using and holding the safest form of money — which is Bank of England money — in their everyday lives. That’s the question that we’ll explore in this taskforce between the Treasury and the Bank of England over the next year,” he added.

Cunliffe warned in October that cryptocurrency might collapse due to a lack of fundamental value and severe price volatility. He then encouraged regulators to implement crypto asset guidelines as soon as possible.

Patrick

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