Bank of England Demands Better Regulations on Crypto Platforms
- Bank of England joins the growing number of regulatory bodies to demand stricter rules for the crypto market.
Things have not gone as planned for the crypto community since it enjoyed the crypto boom of 2021. Many crypto experts predicted 2022 to be the year when the crypto world enjoys the spotlight. However, the industry has often been in the limelight this year but for the wrong reasons.
Bitcoin and Ethereum’s decline began the slow and steady collapse of the market followed by numerous cases of rug pulls and hacks that robbed several investors of their assets. The recent failure of platforms such as Terra, Three Arrows Capital, and Celsius all but crowned what has been a nightmare year so far.
Following the series of negative events, the Bank of England has called for stricter rules for crypto to avoid what it calls “systemic risks.” The central bank of the United Kingdom called for further regulations owing to the events that have left investors vulnerable to losses.
The Bank of England’s Financial Stability Report stated that crypto asset valuations have declined dramatically, dropping from a peak of about $3 trillion in 2021 to its current $883 billion. The report further noted that this financial collapse did not pose dangers to financial stability altogether, but, stricter regulations are required going forward to safeguard the larger financial system.
The report noted that,
A number of vulnerabilities were exposed within cryptoasset markets similar to those exposed by past episodes of instability in more traditional parts of the financial system. These events did not pose risks to financial stability overall. But, unless addressed, systemic risks would emerge if cryptoasset activity, and its interconnectedness with the wider financial system, continued to develop.
The Bank of England has joined the growing list of regulatory bodies to pay closer attention to the crypto space. It issued a warning in December 2021 that the crypto industry might constitute a danger to the current financial system.
The Growing Calls for Crypto Regulation
This news of the Bank of England’s crypto demands comes after reports emerged that the UK government is looking for ideas on taxing decentralized finance transactions from investors, experts, and businesses. This covers staking and lending for digital currency.
Authorities are reportedly seeking to collect data and make an informed decision about placing tax in this area of the crypto market. The possibility that DeFi can be utilized for money laundering or other criminal activity is one worry the UK government has. Further sources of concern are that DeFi’s quick growth can have an effect on the established financial system. The UK government plans to make the country a conducive place for investors and intends to eliminate possible sources of financial risk.
British authorities further requested the feedback of digital experts on this matter, noting that they had until August 31 to submit their opinions. Many see this move as some formal recognition of the crypto industry, and while that may be correct, it is also a step further in regulation.
The UK is not the only region seeking to place taxes and further regulations on the crypto market. The Indian government recently imposed a 30% income tax on crypto earnings and a 1% tax deducted at source. Recently, the Central Bank of Europe called for a single regulatory framework for the European crypto market. While all these are geared towards safeguarding the interests of investors, they are also bringing the industry closer to regulation.