The Bank of England states that crypto assets pose “limited” direct risks to the stability of the nation’s financial system. “Cryptoasset and associated markets and services continue to grow and to develop rapidly. Such assets are becoming increasingly integrated into the financial system,” the U.K.’s reserve bank explained.
Crypto Poses Limited Risks to UK’s Financial Stability
The Bank of England’s Financial Policy Committee (FPC) published the October edition of the “Financial Stability in Focus” report Friday.
The Financial Policy Committee has 13 members, 6 of whom are Bank of England personnel, consisting of the guv and 4 deputy guvs. The FPC “identifies, monitors and takes action to remove or reduce systemic risks with a view to protecting and enhancing the resilience of the U.K. financial system,” the central bank described.
The committee composed:
Cryptoasset and associated markets and services continue to grow and to establish quickly. Such assets are becoming increasingly integrated into the financial system. The FPC judges that direct risks to the stability of the UK financial system from cryptoassets are presently restricted.
“However, regulatory and law enforcement frameworks, both domestically and at a global level, need to keep pace with developments in these fast-growing markets in order to manage risks and to maintain broader trust and integrity in the financial system,” the committee added.
The committee even more kept in mind that it “will continue to pay close attention to developments, including the relationship between cryptoassets and the U.K. financial system, and thereby seek to ensure resilience to systemic risks that may arise from further developments in cryptoasset markets,” concluding:
The FPC considers that financial institutions should take a cautious and prudent approach to any adoption of these assets.
Early this month, the International Monetary Fund (IMF) alerted that the increasing appeal of cryptocurrencies postured brand-new difficulties to financial stability, mentioning that it might “reduce the ability of central banks to effectively implement monetary policy” and “create financial stability risks.”
In July, Bank of England Deputy Governor Jon Cunliffe said that cryptocurrencies were not big enough to pose financial stability risk. “They’re not of the size that they would cause financial stability risk, and they’re not connected deeply into the standing financial system,” stated the deputy guv.
