The Bank of England’s Financial Policy Committee to guard against potential risks cryptocurrency called for “strengthened regulation” in the market.
“They may pose a threat to the financial system in the future”
Noting the recent market turmoil, the committee said that crypto assets do not yet pose a threat to the more general financial system, but may become more integrated into mainstream finance in the future, according to the meeting summary notes released on Tuesday.
The committee focuses on the central bank’s role in maintaining financial stability.
The crash of Terra’s stablecoin in May and last month bitcoin Along with the fall, the freezing of withdrawals by cryptocurrency lending companies, including Celsius Network and Babel Finance, has caused regulators to focus their attention on the digital asset industry.
Recent Downturn in Cryptocurrency and Terra Crash Moves Bank of England into Action
“This highlights the importance of the need for enhanced regulatory and law enforcement mechanisms to address developments in the cryptocurrency markets and their operations,” the bank said in its quarterly Financial Stability Report.
The UK Treasury has said many times before that the Bank of England plans to include systemic stablecoins under its governance.
In this case, the country’s central bank will oversee stablecoins linked to the overall financial system.
According to the published report, a systemic stablecoin backed by a commercial bank’s reserves could introduce “undesirable financial stability risks.”
The UK’s financial sector regulator, the Financial Conduct Authority, said it would consider the collapse of the Terra ecosystem when creating new rules for the industry.
In April, the UK Treasury announced that it plans to set up a cryptocurrency administration and bring stablecoins under existing payment arrangements.
The UK is not the only country to call for policies to protect against financial stability risks posed by crypto assets.
The European Systemic Risk Board, which is responsible for ensuring the stability of the financial system in the European Union, recently stated that it wants to set standards with regulators around the world to take action against crypto assets that may have an impact on the financial system.