Crypto Assets Cause ‘Limited’ Risks to the UK Financial System Stability Says Bank of England

  • October 19, 2021
  • Jennifer Moore

According to the Bank of England, crypto-assets create only “limited” risks to the country’s financial stability. “Crypto assets are becoming increasingly integrated into the financial system,” says the central bank of the U.K. 

Regulations “need to develop quickly”, in order to tackle the risks cryptocurrencies “could pose in the future”.

The FPC’s Take on Crypto Assets

The Financial Policy Committee (FPC) of the Bank of England “identifies, monitors and takes action to remove or reduce systemic risks with a view to protecting and enhancing the resilience of the U.K. financial system,” as per the central bank. It comprises 13 members including the governor and four deputy governors. Recently, the FPC has made this announcement in the October publication of the “Financial Stability in Focus” report.

The FPC published:

“Crypto asset and associated markets continue to grow and develop rapidly. Such assets are becoming increasingly integrated into the financial system.”

 As per the FPC, “direct risks to the stability of the UK financial system from crypto assets are currently limited.”

“However, regulatory and law enforcement frameworks, both domestically and at a global level, need to keep pace with developments in these fast-growing markets.” So as to “manage risks and to maintain broader trust and integrity in the financial system,” the committee included.

The committee further affirmed their direct involvement in the smooth functioning of crypto and the U.K. financial system dynamic. And by doing so “seek to ensure resilience to systemic risks that may arise from further developments in crypto-asset markets.”

Also Read: Australian Senator Bragg Indicates Crypto Legislation Changes Likely by 2022

A Cautious Approach Towards Crypto Assets by the FPC 

The FPC advises financial institutions to take a cautionary stance “and prudent approach to any adoption of these assets.”

With the surge of crypto adoption worldwide, the market has grown from just $16 billion to $2.3 trillion in only five years. Therefore, the Bank of England considers crypto assets to be a potential risk to the global financial system.

The BoE’s Deputy Governor, Jon Cunliffe said that the rise of the crypto industry and its amalgamation with the traditional financial system could pose systemic risks. With more leveraged players coming into the financial market with crypto advancement in unregulated avenues, the now limited risks could grow rapidly. He added that regulation must be “pursued as a matter of urgency” while quoting Gary Gensler’s latest remark – “financial innovations throughout history do not flourish outside public policy frameworks.”

Also Read: City In Canada To Use Bitcoin Mining To Supply Residents’ Heat

Wrapping Up

The bank stressed the importance of “regulatory and law enforcement frameworks, both domestically and at a global level” keeping up with the fast-developing crypto markets in order to curtail systemic risks. The FPC is going t

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