The Bank of England (BoE) reiterated its skepticism towards cryptoassets, saying that the rapid adoption of cryptocurrencies could pose a danger to the current financial system.
BoE Vice President of Financial Stability Sir Jon Cunliffe recently stated in an interview with the BBC that the potential risk in cryptocurrencies stems from volatility in cryptocurrencies.
Stating that Bitcoin and other cryptocurrencies are becoming more common day by day in the UK, Cunliffe warned that if there is a sharp decline in cryptocurrencies, this drop may have unexpected effects.
According to Cunliffe, in the event of a sharp decline in the value of cryptocurrencies, it will be up to the central bank to contain the effects of the decline. The BoE official pointed out that standard regulations regarding cryptocurrencies should be enacted in order to reduce the risks that may arise in this context.
“Their prices can be quite volatile. They can drop to zero theoretically or practically.
I think the point of concern is when cryptocurrencies are integrated into the financial system, that is when a major price correction could really impact other markets and affect established financial market players.
We haven’t experienced that yet, but it takes time to design standards and regulations.”
Sir Jon Cunliffe stated that about 0.1% of the wealth of families in the UK is in cryptocurrencies, which corresponds to about 2.3 million people.
Emphasizing that the risks will increase with the widespread adoption of the crypto industry, Cunliffe said, “We really need to roll up our sleeves and continue with it so that when this becomes a much bigger issue, we will have the regulatory framework to contain the risks.” said.
*Not investment advice.