Bank of England: Crypto Needs Enhanced
Regulatory and Legal Frameworks
The Bank of England believes that the market's extreme volatility highlights the need for improved regulatory and legal frameworks. The British central bank has issued a warning that the price of cryptocurrencies might decrease much more.
According to the Financial Policy Committee of the Bank of England, the British central bank, reported sources that the "extreme volatility" in cryptocurrency prices in recent months highlights vulnerabilities in the market. The sources stated that the Bank of England emphasized the need for stricter law enforcement and regulation for the crypto industry, citing a $2 trillion decline in the entire market value of crypto assets. Approximately $1 trillion is the current market valuation of all cryptocurrencies. When it peaked in November of last year, it was close to $3 trillion.
Last month, Agustin Carstens, the general manager of the Bank of International Settlements (BIS), stated that all of the previously identified flaws in the cryptocurrency market had mostly manifested. They include participants unwinding leveraged holdings and liquidity imbalances.
The British central bank issued a warning that the cryptocurrency market would see more declines, stating: “This highlights the need for improved regulatory and law enforcement structures to manage developments in these markets.” The central bank warned that systemic risks could arise if crypto activity and its interconnectedness with the traditional financial system continue to increase, even though it was noted that the volatility in the cryptocurrency market is not currently posing a risk to the stability of the U.K. financial system.
Similar remarks were made by Christine Lagarde, head of the European Central Bank (ECB), last month: “Cryptoassets and decentralized finance (defi) have the potential to seriously endanger financial stability.”
Sir Jon Cunliffe, the deputy governor for financial stability at the Bank of England, has stated on several occasions that the cryptocurrency market might be dangerous if it is not immediately controlled. He issued a warning in May that crypto investors will face challenging times as the Federal Reserve and other central banks tighten monetary policy.
Bank of England Governor Andrew Bailey stated in June that anyone who invests in crypto assets should be ready to lose all of their money. He emphasized that bitcoin is not a useful form of payment and that cryptocurrencies lack inherent value.
