The Bank of England [BOJ] has warned that the effect of the crypto meltdown could trigger further price slump in the broader financial market.
The Top bank’s Financial Policy Committee stressed that the $2 trillion [£1.67 trillion] crypto market wipout has created “extreme volatility” and “vulnerabilities” in recent months and tougher regulation is the need of the hour.
“Both the experience that we’ve had in recent weeks and also the work that we’re doing both domestically and internationally, I think further draws out that there are issues both in the unbacked crypto world and the so-called stablecoin,” Bank of England’s Governor Andrew Bailey stated.
“These events did not pose risks to financial stability overall. But unless addressed, systemic risks would emerge if cryptoasset activity, and its interconnectedness with the wider financial system, continued to develop,” the BoE said in its latest financial stability report.
“This underscores the need for enhanced regulatory and law enforcement frameworks to address developments in these markets and activities.”
Bank Of England Gov-” Crypto-Assets Has No Intrinsic Value”
Bailey, a long-time crypto skeptic, had recently that the asset class has “no intrinsic value.” His comments came after the UK- based Celsius’s decision to halt transfers and withdrawals, citing “extreme market conditions”.
Bank of England including other regulators across Europe have been toughening their rhetoric against the crypto industry, warning that the market crash could hurt the wider financial system.
The apex bank began drafting Britain’s first regulatory framework for digital assets in March, cautioning that it is better to put guard rails as its rapid expansion might pose a danger to financial stability if left uncontrolled in the future.
On top of that, the geopolitical tensions following Russia’s invasion of Ukraine had fuelled concerns that crypto assets might be used to circumvent financial restrictions placed on Russia.
“While crypto-assets are unlikely to provide a feasible way to circumvent sanctions at scale at this time,” the Bank of England’s Financial Policy Committee [FPC] said in a statement then.
“The possibility of such behavior underscores the importance of ensuring that innovation in crypto assets is accompanied by effective public policy frameworks to… maintain broader trust and integrity in the financial system,” it added.