According to the Bank of England, even though the risk from crypto is limited, it is expected to increase in the future.
The Financial Stability Report was published Friday and talked about several financial matters, including virtual currencies. Crypto assets are becoming more and more influential in our everyday lives. For them to be safe enough, new regulations must be implemented said the Bank of England.
“Cryptoasset and associated markets and services continue to grow and to develop rapidly. Such assets are becoming increasingly integrated into the financial system. The FPC judges that direct risks to the stability of the UK financial system from cryptoassets are currently limited.”
“However, regulatory and law enforcement frameworks, both domestically and at a global level, need to keep pace with developments in these fast-growing markets in order to manage risks and to maintain broader trust and integrity in the financial system.”
The central bank is concerned about crypto, but it doesn’t feel the same when it comes to CBDCs. In May, the deputy governor of the Bank of England, Sir Jon Cunliffe stated in a speech that the United Kingdom may issue a central bank digital currency in the future.
He declared that this plan can become reality if public money will outlive private replacements. In fact, the launching of CBDC would help in the increasing skepticism of people towards the public currency.
“The knowledge that under stress depositors have the option to switch into state money may be important in preventing a more general loss of confidence in money.”
According to the deputy governor, if citizens aren’t given another choice, they may turn to stablecoins. Their functionality and low transaction costs are becoming more attractive to people, and that would damage the status of public money.
“There is now the very real prospect of non-banks, including the large technology platforms or ‘big techs’, issuing new forms of digital money, such as ‘stablecoins’ for general payment purposes. These are likely to have greater functionality and lower transaction costs than the current commercial bank digital money offering and could quickly attract a large number of users.”
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