Sir Jon Cunliffe, the Bank of England's (BoE) deputy governor for crypto financial stability may pose an imminent threat to the traditional financial system.
During an interview on November 15 with the BBC "Today" program, Cunliffe argument that the rapid growth of digital assets and their integration with traditional financial services could soon pose systemic risks, stating:
"[Cryptocurrencies] they are growing very fast and they are becoming more integrated into what you might call the traditional financial system. "
โSo the point is approaching where they pose a risk. I think regulators and legislators should think a lot about that, "he added.
While Cunliffe cautioned against integrating volatile crypto assets into the mainstream financial system, he dismissed adjacent concerns related to the rise of stablecoins.
"There are proposals for new actors that are not banks, including some of the big technology platforms and some of the social networks, come into the world and issue their own money," he said. "I think those proposals don't exist on a large scale yet, so I don't think we're behind the curve here."
Cunliffe's latest comments come about a month after he addressed the Society for Worldwide Interbank Financial Telecommunication on October 13, asking policy makers to pursue regulation of cryptocurrencies as a matter of urgency. "
Despite acknowledging that "crypto technologies offer a prospect of radical improvements in financial services." Cunliffe argued that the sector presents significant risks due to price volatility, the lack of consumer protection laws, and the absence of anti-money laundering (AML) provisions in the DeFi sector.
"The magnitude of those risks will depend largely on the nature and speed of the response from the regulatory and supervisory authorities," Cunliffe said.
Related: London Assembly Member Calls For Ban On Crypto Ads On Trains And Buses
On November 9, the central bank and the Treasury of Great Britain issued a joint statement summarizing the upcoming investigations in a central bank digital currency (CBDC) for the UK market.
The duo will launch a consultation in 2022 to assess the feasibility of a UK CBDC, explore potential design features and consider the positive and negative implications of issuing a CBDC.
The BoE added that "no decision has been made" to launch at CBDC at this stage.
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