Cryptocurrencies are now close to being a threat to the world’s financial systems, says Sir Jon Cunliffe, the current Deputy Governor for Financial Stability at the Bank of England. He has urged regulators to start acting now. Sir Jon Cunliffe believes that the cryptocurrency market’s volatility will soon begin to influence the traditional financial markets.
On the BBC Radio Today program, yesterday on the 15th of November, he went on to say that in his view, cryptocurrencies are growing very fast. If regulations are not put in place before things get out of hand, the effects on the financial market may be damaging. He believes that the risk is becoming more and more imminent, and it is something regulators and policymakers need to pay attention to now.
Laws to regulate cryptocurrency and protect end-users from the inherent risks within the system are becoming a priority for regulators worldwide. The Financial Conduct Authority is very concerned about young investors who may not necessarily know or care for all the facts. There is pressure on the European Union to decide on better cryptocurrency regulation by Autumn. The Basel Committee is also set to look at its submissions regarding bank involvement in the cryptocurrency space.
Not All Digital Currencies Are An Immediate Threat
Sir Jon Cunliffe also made some distinctions between the coins requiring urgent regulations and the ones that, as of right now, do not. He said that tokens developed by private organizations like Meta that produce stable coins like Diem do not need immediate regulations.
He is aware private organizations are making proposals to produce their digital currencies. The difference with this scenario is that these calls are not yet widely increased, and as such, policymakers are not yet at a disadvantage.
The statements from Sir Jon Cunliffe come while the Bank of England is consulting various industry experts to develop a central digital currency for the UK. The desire to launch digital currencies regulated by central banks is not unique to England, with digital currencies promising fewer fees and transaction speed.
Britain’s CBDC Launch And Development
The Britcoin, as it would be named, will create a digital pound that can be used alongside the regular paper cash for transactions. It would have its value pegged to the fiat currency and will be minted by the Central Bank.
Policymakers have, however, informed the public that the development of this currency requires a lot of research and consultation. As such, Britcoin is not expected to launch before 2025. Sir Jon Cunliffe has clarified that inherent risks posed by CBDCs are different from cryptocurrency as they will be subject to government regulations and pegged to a fiat currency avoiding the swings that plague the crypto market.
The reason for the UK considering a CBDC, he believes, is because the way we carry out transactions is evolving with time, and the system has to evolve along with it. Today, many cryptocurrencies have taken a bit of a nosedive, with Bitcoin dropping about 7% and trading around the 60,000 dollar price point.