The Bank of England Deputy Governor has warned about cryptocurrencies losing their value, stating that if cryptocurrencies were to fall they could seriously affect the established financial market.
Sir Jon Cunliffe spoke about cryptocurrencies on the BBC’s Today programme, during which he shared his thoughts on their rapid growth, and the dangers that they pose.
“Their price can vary quite considerably and they could theoretically or practically drop to zero. The point, I think, at which one worries is when it becomes integrated into the financial system — when a big price correction could really affect other markets and affect established financial market players” he noted.
This is not the first time the BoE Deputy Governor has spoken out against cryptocurrencies. In October the Deputy Governor said that a collapse in the price of cryptocurrencies is a plausible scenario that may become a ‘contagion’ that would spread across the global financial sector.
At the time Sir Cunliffe said:
“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.”
In his recent interview with the BBS, Cunliffe emphasised the need for stringent regulations as a way to contain the risks posed by crypto:
“It’s not there yet, but it takes time to design standards and regulations,” he additionally told the BBC. “We really need to roll our sleeves up and get on with it, so that by the time this becomes a much bigger issue, we’ve actually got the regulatory framework to contain the risks.”
Cryptocurrency is growing fast, and has led to a sense of urgency from central banks and regulators who self-admittedly are struggling to keep up with the nascent industry. With large-scale acquisitions and expansions remaining largely unregulated, the fear by Cunliffe is that a crash could trigger a large-scale crisis greater than that of the 2008 financial crisis.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.