Bank of England: Crypto Market Needs Urgent Regulation

Sir John Cunliffe is the deputy governor at the Bank of England. Speaking on the matter of cryptocurrencies, he shed light on the possible negative impact that the emerging cryptocurrency market can have. In his opinion, a digital asset does not pose any immediate threat to the centralized monetary system and the centralized financial infrastructure.

However, he claimed that the government needs to treat the matter of crypto regulations as a priority. Speaking to the media, Cunliffe said that digital trading legislation is critical and urgent. He further explained that there are several good reasons that the state should try to address the issue as soon as possible. It is no secret that many banks in England have been making policies to limit and discourage the use of cryptocurrency among their clients.

Financial Crash of 2008

Everyone who remembers the crash of 2008 knows that it is something that should not be repeated at any cost. Cunliffe, in his capacity of BOE governor, claims that the recent surge in digital asset trading has many similar facets as the 2008 market fall. He said that in case the value of any major cryptocurrency falls back to zero, the investors in debt would be devastated.

If such a scenario takes place, the brokers who have taken debt for keeping their funds going would have to look for cash that is non-existence in the market. Cunliffe further added that one of the biggest causes of the 2008 market crash was that the fall of the sub-prime sector. He also claimed that most of the cryptocurrency projects are not backed by cash or commodities, and they are only computer-coded without any backup reserves.

In the current year, cryptocurrencies have come out from the confines of IT experts and computer programmers into the traditional financial industry. Several biggest financial leaders in the world have decided to jump onto the crypto bandwagon due to increasing customer demands. Cunliffe told the media in his latest speech that due to the trickle-down effect, the fall of the crypto world can also reflect on the main financial frame.

He pointed out the rapid growth rates of the cryptocurrency market that has gone from $800 billion to $2.3 trillion in the matter of one year. This 200% rate of appreciation also comes with a lot of risks. Therefore, Cunliffe claims that the government must take the necessary steps to introduce proper digital asset regulations to ensure that the financial market is ready to handle the massive risk factor attached to this nascent industry.

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