A Bank of England executive called crypto a “great opportunity.”
But he also sounded an alarm about the worst-case crypto scenario. Does he have a point? Should blockchain businesses and token investors worry?
Why Is the Bank of England Worried About Crypto?
Jon Cunliffe, the Bank of England’s deputy governor for financial stability, expressed grave concerns about the cryptocurrency market. Specifically, he pointed to the crypto-asset growth rate, which skyrocketed from $16 billion to $2.3 trillion in just five years. Cunliffe also linked it to the $1.2 trillion subprime mortgage market that ignited the 2008 financial crisis.
He explained: “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.” Cunliffe went on to warn that tokens “have no intrinsic value and are vulnerable to major price corrections.”
He also touched on the growing inter-connectivity of traditional and crypto markets, questioning:
“The forward-looking question is what could result from such events, if these crypto-assets continue to grow at scale, if they continue to become more integrated into the traditional financial sector and if investment strategies continue to become more complex?”
The bank executive argued that failure to establish a cooperative, cross-border regulatory framework for the crypto market could trigger a global economic spiral similar to the financial crisis of 2008.
But Cunliffe Doesn’t Want People to Panic; He Just Wants Regulation
Despite the dire comparison, Cunliffe also urged people not to “overreact” or greenlight oppressive regulations in a fit of panic. He even praised crypto technology for offering “radical improvements” in the financial services sector and admitted that the current risk factors are low.
By the end of the talk, it was clear that Cunliffe was fiercely advocating for regulations. He warned: “Although crypto finance operates in novel ways, well-designed standards and regulation could and should enable risks to be managed in the crypto world as they are managed in the world of traditional finance.”
In closing, Cunliffe quoted Ralph Waldo Emerson, who once famously said: “If you build a better mousetrap, the world will beat a path to your door.” The British banker added, “But it has to be a truly better mousetrap and not one that simply operates to lower standards — or to no standards at all.”
Should the Cryptocurrency Market Be Regulated
The question of whether or not the cryptocurrency market should be more regulated is up for debate. There are compelling arguments for and against. Bottom line: if you’re in the market now, make sure you’re operating on the right side of the law. Global regulatory measures are still years off, but you still must comply with the current patchwork of regulations. And if the SEC sidelines your business now, you may never get to play in the big game several years down the road.
Consult With a Cryptocurrency Business Lawyer
The Kelly Law Firm is a pioneer in blockchain and cryptocurrency law. We handle contract negotiations, NFT matters, and registration compliance, in addition to blockchain smart contract legalities. We’ve helped countless clients with tech-related legalities. If you’re ready to speak with a cryptocurrency lawyer, get in touch today.
