The Bank of England has revealed that it is working on sketching a regulatory framework for crypto assets, according to statements stemming from the central bank’s Financial Policy Committee on Thursday.
BOE Stresses Crypto Assets Need Effective Public Policy Frameworks
On Thursday, the Bank of England (BOE) told the press that it was outlining a regulatory framework for digital currencies. The BOE statements come from the central bank’s Financial Policy Committee (FPC) and the bank mentioned sanctions related to the ongoing Russian-Ukrainian war. Lately, financial regulators and bureaucrats around the world have feared that Russia is circumventing economic sanctions via crypto assets.
“While crypto assets 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 crypto assets is accompanied by effective public policy frameworks to… maintain broader trust and integrity in the financial system,” the BOE press statement mentioned on Thursday.
BOE says crypto assets could ‘pose a number of risks to financial stability’, central bank worries about stablecoins
Members of the BOE have been critical of the cryptocurrency economy for some time. In mid-November last year, Bank of England Governor Andrew Bailey raised concerns that El Salvador would make bitcoin legal tender in the South American country. The following month in December, Sir Jon Cunliffe, BOE Deputy Governor for Financial Stability, said crypto asset prices could fall to zero.
The report on Thursday stemming from the FPC mentions financial stability. “The FPC continues to judge that direct risks to the stability of the UK financial system from crypto assets are currently limited, reflecting their limited size and interconnectedness with the wider financial system,” the central bank’s committee noted. The FPC further added:
However, if the pace of growth seen in recent years continues and as these assets become more interconnected with the wider financial system, crypto assets will present a number of risks to financial stability in the future.
Since the start of the Russia-Ukraine conflict, politicians worldwide have been either discussing, proposing, or even implementing legislation to research and regulate digital currencies. Statements from the FPC meeting on Thursday further indicate that the BOE wants crypto assets to fall under the same regulatory umbrella as traditional financial assets.
In addition to outlining a regulatory framework for crypto assets, the FPC mentioned stablecoins, and that a major without a reliable deposit guarantee could pose a threat to the financial system. “The FPC believes that a systemic stablecoin backed by a deposit at a commercial bank would introduce undesirable risks to financial stability,” the committee added.
