Bank of England Says Crypto Assets Present Financial Stability Risks – On Thursday, the Bank of England (BOE) told the press that it is working on a regulatory framework for digital currencies. The Bank of England’s Financial Policy Committee (FPC) published the statements, which addressed sanctions pertaining to the present Russia-Ukraine crisis.
Financial authorities and bureaucrats throughout the world have recently expressed fear that Russia would utilize cryptocurrency to evade economic sanctions.
“While crypto assets at this time seem to be unlikely to provide a way to circumvent sanctions on a large scale,” the BOE stated in a statement on Thursday, “the possibility of such behavior highlights the importance of ensuring that innovation in crypto assets is accompanied by an excellent public policy frameworks to maintain broader integrity and trust in the financial system.”
Members of the BOE have been skeptical of the bitcoin economy for a long time. Andrew Bailey, the governor of the Bank of England, expressed concern in mid-November last year about El Salvador’s decision to make bitcoin legal tender.
The Bank of England’s deputy governor for financial stability, Sir Jon Cunliffe, forecast that crypto asset prices will drop to zero in December. The FPC report released on Thursday mentions financial stability.
The FPC stated, “The FPC continues to consider that direct risks towards the stability of the UK financial system from crypto assets are obviously limited, reflecting their modest size and interconnectivity with the wider financial system.”
The FPC continued, saying:
“However, if the recent rate of growth continues, and these assets become more linked with the bigger financial system, crypto assets would present a range of financial stability challenges in the future.”
Since the start of the Russia-Ukraine crisis, politicians all over the world have been proposing, debating, and even implementing legislation to analyze and control digital currencies.
The BOE expects crypto assets to be regulated similarly to traditional financial assets, according to statements made during the FPC meeting on Thursday.
In addition to creating a legal framework for crypto assets, the FPC considered stablecoins and how a major one without a sufficient deposit guarantee could pose a threat to the financial system.
The committee stated, “The FPC asserts that a systemic stablecoin guaranteed by a commercial bank deposit would entail adverse financial stability risks.”