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Last week, Bank of England Deputy Governor Jon Cunliffe, discussed cryptocurrency and whether it poses financial stability risk in an interview with CNBC on Wednesday. He stated that cryptocurrencies are not big enough to pose a risk on financial stability:
“The speculative boom in crypto is very noticeable but I don’t think it’s crossed the boundary into financial stability risk. They’re not of the size that they would cause financial stability risk, and they’re not connected deeply into the standing financial system,”
The deputy governor explained on Wednesday that crypto speculation is currently still limited to retail investors and reiterated the British central bank’s position that people investing in cryptocurrency should be prepared to lose all their money. This is a viewpoint Andrew Bailey, the governor of the Bank of England, has expressed on numerous occasions
Cunliffe said:
“There are issues of investor protection here. These are highly speculative assets. But they’re not of the size that they would cause financial stability risk, and they’re not connected deeply into the standing financial system.”
He further added:
“Were we to start to see those links develop, were we to start to see it move out of retail more into wholesale and see the financial sector more exposed, then I think you might start to think about risk in that sense.”
Cunliffe also noted that speculative crypto assets, for example Bitcoin, should be distinguished from stablecoins. He emphasized the need for stablecoins to be regulated. The deputy governor shared:
“I think the international community needs to at least be developing standards to actually be able to distinguish but also to have regulatory standards for that sort of product.”
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Previously, the governor of the Bank of England, Andrew Bailey, called cryptocurrencies a dangerous area as he predicted in June that they won’t last. “There will inevitably be elements of tough love” (in crypto regulation), he opined.
In May he had dismissed crypto by saying it to “have no intrinsic value.” However he noted that this “doesn’t mean to say people don’t put value on them, because they can have extrinsic value.”
In the same month, the Bank of Ireland said that it considers Bitcoin to be of “great concern”.