People are running away from the teetering traditional finance system and are investing into crypto in a last ditch attempt to protect their wealth. Central banks see this happening and know they need to do something before the trickle becomes a torrent.
The Bank of England has warned of the risks that cryptocurrencies pose to the financial system on several occasions now. Sir John Cunliffe, Deputy Governor of the BOE, remarked recently that he feared the effect of the huge price volatility of crypto on other markets, should it become more widely adopted.
“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,”
The fact that the “established financial market players” have fully contributed to the current monetary crisis is not discussed. Nor is the fact that investors are only going over to crypto because what they can get in traditional banking works out at minus 10 to 15% a year when you factor in inflation (Figures from Shadowstats.com).
The Thai central bank also has similar worries. According to an article on Bloomberg yesterday, the Bank of Thailand is working on a consultation paper that also aims to lessen the risks to the existing financial system from cryptocurrencies.
However, even though the Thai bottom line is that cryptocurrencies must not be a means of payment, the Governor, Sethaput Suthiwartnarueput, does acknowledge the technological innovations that crypto brings to finance.
Sethaput said that he wants to get the balance right between protecting investors and the financial system, but also not at the expense of squashing financial innovation.
“We want to ensure that we strike the right balance between allowing financial innovation and managing risks. The new rules will provide adequate safeguards for consumers as “risks are under-appreciated” currently,”
Is Crypto a threat to the financial system?
It can well be argued that the cryptocurrency sector certainly is a threat to the existing financial system. However, is it the fault of a lot of cryptocurrencies that they are completely transparent, provide much more yield than banks or other financial institutions can give, and allow entry to everybody, not just ‘accredited investors’.
The existing monetary system has been built up over many decades. Not in a way to benefit the average person, but in a way that is completely stacked against them.
Central authorities play god by pouring currency into the system, causing inflation, and thereby debasing the purchasing power of the man on the street.
This system simply just doesn’t work anymore. So yes, crypto is an absolutely massive threat to its ongoing survival. However, when it all does come crashing down, it won’t be because of crypto. It will be because the system got too greedy and because the debt-based ponzi scheme that is operated, finally imploded and came crashing in on itself.
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.