A senior Bank of England official called the regulation of digital currencies a “matter of urgency” for financial stability, citing the risks posed by digital currencies to the wider financial system.
Bank of England Deputy Governor Jon Cunliffe said the risks posed by stablecoins in particular, as well as decentralized and non-backed asset derivative trading, were sufficient prospects to require a more practical regulatory approach.
While the central bank official noted that the risks are currently low, he said the risks depend on “the degree of interconnection between the crypto and the mainstream financial sector.”
As the digital currency and the traditional financial sector come closer and closer, one could argue that these risks are only growing.
The vice-governor cited the slow development of regulation, which he said the authorities should pursue “urgently”.
“Financial stability risks are relatively small right now, but they could grow very quickly if, as I expect, this area continues to grow and expand at a sustained pace. The magnitude of these risks will largely depend on the nature and speed of the response from regulators and supervisors. “
The Bank of England has been shaping digital currency policy for several years now, both in its role as monetary authority in the UK and in shaping plans for a UK central bank digital currency, one pound digital sterling.
Cunliffe recently helped establish a joint task force with Katharine Braddick of HM Treasury to take a combined authority approach to digital currency issues in the country.
As the regulation of digital currency and the Bitcoin industry is still taking shape in the UK, the deputy governor’s statements will be seen as influential in shaping the response of lawmakers across the country.
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