Bank of England says “extreme volatility” in crypto markets “underscores the need for a strengthened regulatory and law enforcement framework.”
The Bank of England’s central bank warns that crypto prices could fall further.
Bank of England Calls for Tighter Crypto Regulation
The monetary policy committee of the Bank of England (BOE), Britain’s central bank, said Tuesday that “extreme volatility” in crypto prices in recent months underscores the vulnerability of the crypto market, Bloomberg reported.
Citing a $2 trillion decline in the total market value of crypto assets, the Bank of England stressed the need for stricter law enforcement and regulation for the crypto sector, the publication reported. Currently, the total market capitalization of all cryptocurrencies is about $1 trillion. At its peak last November, it was nearly $3 trillion.
Last month, Agustin Carstens, general manager of the Bank for International Settlements (BIS), said that all the weaknesses in the crypto market “have materialized considerably what was pointed out before.” They include liquidity mismatches and participants unwinding leveraged positions.
Warning that the crypto market could decline further, the British central bank said.
This underscores the need for a stronger regulatory and law enforcement framework to deal with these market developments.
While noting that crypto market volatility does not currently pose a risk to the stability of the UK financial system, the central bank warned that systemic risks will emerge if the interconnection between crypto activities and the traditional financial system continues to grow.
Last month, European Central Bank (ECB) President Christine Lagarde said the same.” Crypto assets and decentralized finance (defi) could pose a real risk to financial stability.”
Sir John Cunliffe, vice president for financial stability at the Bank of England, has stated on several occasions that cryptocurrency markets could be a threat unless urgently regulated. In May, he warned of tough times ahead for cryptocurrency investors as the Federal Reserve and other central banks tighten monetary policy. Last December, he said cryptocurrency prices could go to zero.
Bank of England Governor Andrew Bailey said in June that investors must be prepared to lose all their money when investing in crypto assets. He stressed that cryptocurrencies have no intrinsic value and that bitcoin is not a practical means of payment.
Image credits: Shutterstock, Pixabay, Wiki Commons