Sir Jon Cunliffe, deputy governor for financial stability at the Bank of England, warned that cryptocurrencies are “very vulnerable to sentiment and prone to collapse.” He urged regulators to “get to work” and regulate crypto under the principle of “same risk, same regulatory outcome.”
Cunliffe of the Bank of England on crypto regulation
Sir Jon Cunliffe, Deputy Governor for Financial Stability at the Bank of England (BOE), discussed cryptocurrency risks and regulation at the British High Commission in Singapore this week.
Bank of England officials warned.
Financial assets that have no intrinsic value are …… only worth what the next buyer will pay. Thus, they are inherently unstable, very vulnerable to sentiment, and prone to collapse.
He explained that some crypto assets are purely speculative and have nothing behind them, for example, bitcoin. He also reiterated his earlier warning that if you invest in crypto assets, you must be prepared to “lose all of your money.”
The British central bank governor added that recent volatility in the crypto market has not posed a risk to the overall financial system, noting that crypto may not be “sufficiently integrated” into the rest of the financial system to become an “immediate systemic risk.”
Arguing, however, that the boundary between crypto and the traditional financial system “will become increasingly blurred,” Cunliffe said systemic risk will emerge without action, especially if crypto activity and connections to banks and other markets continue to grow. He stressed that regulators need to “get to work” and put crypto within “regulatory boundaries.”
Cunliffe opined that.
The interesting question for regulators is not what happens next to the value of crypto assets, but what happens next without creating increasing potential systemic risk… Potential innovations… . is what needs to be done to ensure that it happens.
Crypto regulation should follow the principle of “same risk, same regulatory outcome”
The Bank of England’s Deputy Governor for Financial Stability stressed that crypto regulation “must be based on the iron rule of ‘same risk, same regulatory outcome. must be based on the iron rule of ‘same risk, same regulatory outcome,'” he stressed. He continued.
Implicit in our regulatory standards and framework is the level of risk mitigation we deem necessary.
“If we cannot apply the regulations in exactly the same way, we must ensure that we achieve the same level of risk mitigation,” he explained, and suggested that “for certain crypto-related activities, if this proves impossible, then” the activity be suspended.
Federal Reserve Vice Chairman Lael Brainard similarly stated last week that crypto financial systems are “susceptible to the same risks” as traditional finance; the Fed official added, “If the regulatory boundaries encompass crypto financial systems and reflect the same risk, same disclosure, same regulatory outcome If we ensure that they reflect the same principles of the same risks, the same disclosures, and the same regulatory outcomes, future financial resilience will be greatly enhanced.”
Last week, Bank of England Governor Andrew Bailey also warned British lawmakers that cryptocurrencies have no intrinsic value and that crypto assets without backing are “very high risk.”
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