Crypto assets like bitcoin could soon pose a risk to the broader financial system, a deputy governor of the Bank of England has warned.
John Cunliffe said that regulators need proper regulation.
“the point at which [crypto assets] The danger is drawing near. I think regulators and legislators need to think about this seriously,” Mr Cunliffe told the BBC.
“On regulation on the management of crypto assets… we need to start working on making sure that regulation exists.”
According to the Coin Market Cap website, which tracks the value of digital coins, the cryptocurrency market has grown to nearly $3 trillion (£2.2 trillion).
There are growing fears about potential losses for ordinary investors, who have little recourse if they fall victim to scams, fraud or market manipulation.
Regulators have been slow to react to the rapid rise of crypto but are starting to wake up to the dangers.
This month, a body of the US Treasury Department called stablecoins – a type of digital asset pegged to the value of traditional currency – as one of the biggest threats to the financial system.
The President’s Working Group on Financial Markets recommended “immediate” legislation to ensure that stablecoin issuers are regulated like banks.
US regulators have taken a tough stance on stablecoins, including Tether, the largest asset to date, with around $76 billion worth of tokens in circulation.
Tether – the company behind the stablecoin of the same name – has this year reached multi-million dollar settlements with both the New York Attorney General (NYAG) and the Commodities and Futures Trading Commission (CFTC). Both organizations found that Tether’s claim that its currency was backed entirely by reserve US dollars was not true.
Tether is also reportedly being investigated by the Securities and Exchange Commission (SEC). The company and its executives deny wrongdoing.
Bank of England Governor Andrew Bailey warned last year that crypto assets could be worthless and that investors risk losing all the money they put in.
The bank plans to launch a consultancy next year to create its own digital currency called “Britcoin”.
The bank will work with the Treasury to judge the need for a UK Central Bank Digital Currency (CBDC), it said in a statement last week. However, it said that no currency would exist until 2025 at the earliest.
The consultation will look at what further work needs to be done to develop the technology needed to support the digital currency.
Credit: www.independent.co.uk /