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Bank of England Governor Andrew Bailey has warned that crypto-asset firms will not get free passes to innovate from regulators,
While Bailey dismissed criticism that the central bank is not open to innovation when it comes to digital currencies, he said there would be elements of hard love in how the sector is. supervised in the future.
I think as public policy makers we need to be clear on the rules of the road innovation must follow to serve the public interest, Bailey said at the annual conference of lobby group TheCityUKs on June 15. What we can’t have is a world where innovation gets a free pass for a non-public interest. The chances of it ending badly are too high.
It requires early engagement, which we are very keen to do on digital currency, Bailey added. Catching up is not the recipe for success.
The comments follow a consultation launched last week by the Basel Committee on Banking Supervision to impose stricter capital rules on crypto-asset holders, amid fears that the expansion of digital currencies may have an impact on financial stability.
READ Stricter crypto regulations in sight as banking regulator calls for new capital rules
The Bank of England has explored the introduction of a central bank digital currency, but has expressed its own concerns about issues in the use of cryptocurrency, ranging from the resilience of banking sector liquidity and conditions credit to the Bank’s ability to implement monetary policy.
We are not anti-innovation or anti-competition, but we try to manage our sphere of influence to serve our public policy goals, Bailey said at the conference. New forms of digital currency represent an important source of innovation, so we need to assess how they meet our public policy goals.
Digital currencies have the potential to be systemic in terms of importance to the financial system, he said, depending on how they evolve from current levels.
READCity watchdog warns investors of the risk of losing all their money on cryptoassets
We don’t yet know much about the likely demand for digital currency or how it will be remunerated, Bailey added, but hinted that the bank would be prepared to limit the speed of transition to digital currency if necessary.
A precise regulatory model for the crypto industry could vary widely depending on how the digital currency space evolves from here, Bailey said, provided it offers protections equivalent to commercial currency. .
READHow Central Banks Could End Crypto Experiment
The Governor also reiterated the Bank’s position that cryptocurrencies have no intrinsic value unlike stablecoins, which are forms of digital currencies tied to underlying assets like fiat currencies. He also noted that the extrinsic value of cryptocurrencies can be very volatile and could be nothing.
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