Bank of England Deputy Governor Says Regulators Should Hasten Crypto Policy Development
- John Cunliffe adds that it is impossible to manage certain crypto risks, and authorities should stop related operations.
The Bank of England’s Deputy Governor, Jon Cunliffe, has urged regulators to establish efficient crypto regulatory policies quicker. Cunliffe’s remarks were part of his speech at Singapore’s British High Commission on July 12. He also warned that authorities should not assume that the end of crypto has come due to the current conditions of the crypto market.
It would be a grave mistake for them to think that they don’t need to be concerned about it again. Some industry participants have tagged the current crypto market downturn as crypto winter. In the last few months, investors in the crypto market have lost about $2 trillion as the instability, and massive volatility of the market became more exposed.
The crash of the terra network and its effects on other crypto firms further accelerated the meltdown. The collapse of this network has resulted in liquidity issues for the top crypto lender, Celsius, and popular hedge fund, Three Arrows Capital. Crypto technologies allow significant innovation and improvement in the finance industry.
However, Cunliffe explained that the success and sustainability of this new technology must happen within a structure with proper risk management. He joked that no one flies for long in an unsafe airplane.
Establishment of Crypto Regulatory Framework
Recent happenings in the crypto space have forced many regulators to speed up the creation of their crypto policies. The Basel Committee on banking supervision plans to release a report on ways banks can treat crypto assets carefully. This committee sets the standard for all banking policies worldwide.
Similarly, G-20’s financial regulator, the financial stability board (FSB), recently announced that it would present its recommendations for crypto regulation by October. Most of these proposed crypto regulations are also inclusive of stablecoins. These inclusions became more critical after the crash of the TerraUSD.
Stablecoins are cryptos pegged 1:1 to fiat currencies such as the US Dollar. Last month, the European union’s policymakers reached a consensus on establishing crypto policies. They named it the markets in crypto assets regulation, focusing mainly on the stablecoin regulatory framework.
Also, UK authorities plan to release its stablecoin regulatory policy by next month. The UK’s finance department (the Treasury) has released a proposal to govern stablecoins. This proposal could affect the financial systems of top economies.
Before the end of this year, UK regulators (such as the Bank of England) plan to release a consultative report on stablecoin’s regulatory policies. Cunliffe adds that crypto policies should operate under the policy of “similar risks, similar regulation consequences.”
He explained that the rules that apply to risks in the current financial systems should also apply to cryptos that pose similar risks. However, he added that regulators must take new measures if that method fails.
“Crypto technologies offer the prospect of substantive innovation and improvement in finance. But to be successful, sustainable innovation has to happen within a framework in which risks are managed: People don’t fly for long in unsafe airplanes,” he noted.