BoE Governor Says Crypto A Threat To UK

[ad_1]

The cryptocurrency is growing fast enough to soon become a systemic risk to the UK’s financial stability, the Bank of England warned in a report released on Monday (December 13th).

The BoE’s financial stability report for December focuses on four areas of risk: COVID and the economy, bank resilience, mortgage measures and cryptoassets.

The crypto-asset market “is probably not a risk to financial stability today, but it has everything it needs for something that could be,” BoE Governor Andrew Bailey said at the meeting. ‘a press conference. “At the current rapid growth rate, and as these assets become more and more interconnected with the broader financial system, crypto-assets will present a number of risks to financial stability.”

Last month, Sir Jon Cunliffe, the BoE’s deputy governor for financial stability, warned in an interview with Today UK News that the time “is drawing near.”

See also: Regulators feel the pressure as banks, fintechs and crypto firms vie for share of wallet

While Bailey didn’t spell out all the risks in his remarks, he gave an example, saying that a “sharp drop in crypto-asset valuations could cause institutional investors to sell other financial assets and potentially pass on shocks through the financial system, ”adding that“ the use of leverage may further amplify these spillovers.

Calling for a new regulatory regime for crypto in the UK and around the world, Bailey called on banks and other financial institutions to “take a particularly cautious and cautious approach to any adoption of these assets until such regime is in place “.

While no major UK bank has yet reported direct exposure to crypto assets, some are starting to offer a variety of services, such as crypto asset derivatives trading or custodial services.

The crypto market continues to grow rapidly, increasing tenfold since early 2020 to about $ 2.6 trillion last month, or the equivalent of 1% of global financial assets, the FPC said.

Dangerous crypto 1%

Noting that the total market value of crypto-assets has increased tenfold over the past two years, Bailey pointed out that they represent around 1% of global financial assets. This was using a market cap of $ 2.6 trillion in November, when the crypto briefly broke $ 3 trillion in a bullish rally. It is currently around $ 2.1 trillion, almost half that of bitcoin.

Bailey also called the “vast majority” of crypto assets “unsaved”, with the report putting that figure at “around 95%”.

Since cryptocurrencies “have no intrinsic value, [they] are vulnerable to major price corrections, so investors can lose their entire investment, ”he said. This is a point that BoE officials have raised several times before.

Related News: SEC Turns To Crypto Exchanges

The report reiterated the central bank’s call for “strengthened regulatory and law enforcement frameworks, both nationally and globally,” saying it is “necessary to influence developments in these markets. fast growing ”.

That said, he stressed that such regulations should balance the risks posed by crypto with the need to support financial innovation and competition.

Instability ahead

The bank, which has aggressively investigated the potential benefits of a central bank digital currency (CBDC) this year, is also concerned about stablecoins – especially global coins like Facebook’s Diem (formerly Libra) project. , according to the report. He argued that legislation should be passed to “bring systemic stablecoins into the regulatory mandate of the bank”.

It’s a concern that became urgent last week, when Meta (formerly Facebook) announced that the Novi digital wallet it created for Diem would support the dollar-denominated Paxos stablecoin on Meta-owned WhatsApp.

Read more: Is Paxos the new Diem? Stablecoin issuer’s Facebook pilot has just been extended to 2 billion WhatsApp customers

As the world’s most popular messaging service, WhatsApp has two billion customers.

“We often hear that people are using WhatsApp to coordinate sending money to their loved ones, and Novi allows people to do it securely, instantly and at no cost,” Stéphane Kasriel, new executive, said on December 10. from Novi. “Payments will show up directly in people’s chat.

This is exactly what terrifies central bankers, financial regulators and elected officials around the world since the announcement of the Libra / Diem project. The concern is that a stablecoin on such a large platform could bypass national currencies, taking control of the financial system as a whole from the authorities.

——————————

NEW PYMNTS DATA: WHAT BRITISH CONSUMERS EXPECT FROM THEIR GROCERY SHOPPING EXPERIENCES

By the way: Forty-four percent of UK grocery shoppers spend more in grocery stores when they have access to loyalty programs, and an equal share say the presence of loyalty programs alone dictates where they shop. purchases. What UK consumers expect from their grocery shopping experiences surveyed 2,501 UK consumers to examine how retailers can make the most of loyalty programs to increase spending and gain new customers.

[ad_2]