Deputy Governor of the Bank of England said Cryptocurrencies are a serious danger to financial stability

Sir Jon Cunliffe of the Bank of England has encouraged British politicians to consider “extremely carefully” the disruption that combining bitcoin with conventional banking may cause.

According to Sir Jon Cunliffe, the Bank of England’s Deputy Governor for Banking Stability, cryptocurrency may constitute an impending danger to the existing financial system.

Cunliffe said during a Nov. 15 interview with the BBC’s “Today” programme that the fast expansion of digital assets and their integration with conventional financial services might soon pose systemic issues.

[Cryptocurrencies] are growing very fast, and they’re becoming integrated more into what I might call the traditional financial system.

“As a result, the moment at which they constitute a danger is approaching. I believe regulators and politicians should consider this very carefully,” he continued.

While Cunliffe emphasised the dangers of integrating volatile crypto assets into the mainstream financial system, he disregarded worries about the growth of stablecoins.

“There are ideas for new participants who are not banks, such as some of the largest technology platforms and social media platforms, to enter the market and issue their own money,” he said. “I believe that such suggestions do not yet exist on a large scale, and hence we are not behind the curve here.”

Cunliffe’s recent remarks come less than a month after he addressed the Society for Worldwide Interbank Financial Telecommunications on Oct. 13, urging regulators to explore crypto legislation “immediately.”

Despite agreeing that “crypto technologies have the potential to significantly improve financial services,” Cunliffe stated that the market posed considerable dangers because to price volatility, a lack of consumer protection regulations, and the sector’s lack of anti-money laundering (AML) requirements.

“The extent to which such risks might expand will rely in no little part on the kind and speed with which regulatory and supervisory bodies respond,” Cunliffe added.

On Nov. 9, the central bank of the United Kingdom and the Treasury issued a joint statement describing a forthcoming study on a central bank digital currency (CBDC) for the United Kingdom market.

In 2022, the pair will undertake a consultation to determine the practicality of a UK CBDC, to investigate possible design elements, and to weigh the benefits and drawbacks of issuing a CBDC. The BoE said that “no decision” on a CBDC launch has been taken at this time.

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