In a recent speech by Bank of England’s deputy governor of financial stability, Jon Cunliffe, the governor pointed out the systematic risks of crypto-assets and called on the regulators to manage risks associated with cryptocurrencies.
The crypto market, which was just over $16 billion in 2016, has now rapidly expanded to become a $2.3 trillion market. Although the current crypto market value seemed meager compared to the $250 trillion global financial systems, the value is not insignificant to quickly destabilize things, Cunliffe noted in his speech.
“When something in the financial system is growing very fast, and growing in largely unregulated space, financial stability authorities have to sit up and take notice. They have to think very carefully about what could happen and whether they or other regulatory authorities, need to act.”
Cunliffe noted that while crypto technologies might offer ‘radical improvements’ in financial services, their current applications might still pose concerns to financial stability.
Concluding his speech, the governor quoted US SEC chairman Gary Gensler saying “financial innovations throughout history do not flourish outside public policy frameworks.”
Cunliffe noted that well-designed standards and regulations could be able to manage the risks posed by the crypto world as they have managed the risks by the traditional financial system.