The Bank of England has published their Financial Stability in Focus report, which provides an outline of the bank’s regulatory framework for crypto.
The BoE’s Financial Policy Committee (FPC) stated in the report that as cryptocurrencies grow in importance, risks to financial stability could arise, notably : risks to systemic financial institutions; risks to core financial markets, risks to the ability to make payments, and the impact on real economy balance sheets.
In the report, the FPC stated:
“The FPC is of the view that as cryptoassets and DeFi grow and develop, enhanced regulatory and law enforcement frameworks are needed, both domestically and at a global level. These frameworks should address developments in cryptoasset markets and activities, to encourage sustainable innovation, and maintain broader trust and integrity in the financial system”
The FPC further noted:
“While cryptoassets are unlikely to provide a feasible way to circumvent sanctions at scale currently, the possibility of such behaviour underscores the importance of ensuring innovation in cryptoassets is accompanied by effective public policy frameworks”
Regulation of cryptocurrency in the UK has matured in the post-brexit financial landscape, however the UK has still not provided a clear regulatory framework for this industry.
In December, the Executive Director for Financial Stability Strategy and Risk at the Bank of England, Sarah Breeden, highlighted the importance of international coordination among central banks, claiming, in an interview with The Times, that the UK can not solve the challenges of obtaining data on institutional crypto holdings by itself.
The Bank of England Deputy Governor, Sir John Cunliffe, also warned about cryptocurrencies losing their value, stating in December that if cryptocurrencies were to fall they could seriously affect the established financial market.
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.
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