The Bank of England On Forming A New Crypto Regulation Approach

Even though the cryptocurrency and digital asset sectors are still in their infancy, the Bank of England announced drafting the country’s first regulatory framework for cryptocurrencies and digital assets. Following up from their prior observations, the fast expansion and development of the sector is a critical aspect of its regulation since it may pose more dangers to the financial stability of England’s economic future if it is left uncontrolled. According to the Financial Policy Committee, cryptocurrency assets might become a means of circumventing different restrictions placed on particular individuals, and simply the presence of a possibility could put the whole economy in danger. The regulator seeks to do this by developing appropriate public policy frameworks for the increased integration of digital assets into the conventional financial system. According to the Financial Times, because there are no special rules or regulations geared specifically at their usage, the Bank of England has yet to write out a structure to enable other government agencies to engage with this relatively new class of assets.

BOE Criticisms and FPC Opinions

For a long period of time, members of the BOE have condemned the bitcoin economy. In mid-November of last year, Andrew Bailey, governor of the Bank of England, expressed alarm about El Salvador legalizing Bitcoin. Sir Jon Cunliffe, the Bank of England’s deputy governor for financial stability, said the next month in December that crypto asset values might fall to zero. Financial stability is mentioned in a recent FPC report. “The FPC continues to believe that crypto-assets pose modest direct risks to the stability of the UK financial system, owing to their small scale and interconnection with the broader financial system,” the central bank’s committee stated. The FPC then reiterated that, at the moment, digital assets pose no threat to the British economy, which remains one of the world’s most stable systems. However, given the industry’s fast expansion, Britain may resist some dangers in the future.

In terms of growth, the cryptocurrency business surpassed $2 trillion in market value, enabling assets such as Bitcoin and Ethereum to provide investors with many opportunities. Globally, investors were mainly attracted to massive returns. Additionally, the FPC said that since the outbreak of the Russia-Ukraine crisis, governments worldwide have been debating, proposing, and even enacting laws to examine and regulate digital currencies. Additionally, statements from a recent FPC meeting imply that the BOE wants crypto assets to be regulated similarly to regular financial assets. The FPC said that regulation should be based on “equivalence,” which means that crypto-related financial services that fulfil a comparable function to conventional financial services should be regulated similarly. Until the newer crypto assets are completely integrated into the regulatory framework, the BOE is concentrating on ensuring that risks associated with crypto are adequately managed and made aware in the sector. The Financial Conduct Authority warned companies on Thursday that they must adequately inform customers about the dangers associated with unregulated cryptocurrency, especially the new ones with no history.