The Bank of England plans to speed up talks among financial regulators around the world to find ways to monitor and regulate cryptocurrencies. In an interview with The Times, Sarah Breeden, the bank’s executive director for financial stability strategy and risk, said there was an emerging need for stricter rules to regulate the crypto space globally. . The director also acknowledged the growing number of banks and institutional investors getting involved in the crypto industry.
A need for crypto regulation talks
Ms Breeden underlined the difficulty of obtaining data on crypto holdings from institutional investors stressed the need for cooperation between central banks and various regulators around the world. His sentiments were reflected by the Bank of England’s Financial Stability Board (FSB), which has spent the past few years developing a framework for the regulation of crypto.
The FSB also supports the work of the Crypto Assets Working Group, which was established in 2018 to define the UK’s policy and regulatory approach to unsecured cryptocurrencies and their associated market activities. The working group is made up of representatives from the HM Treasury, the Bank of England and the Financial Conduct Authority (FCA).
In other news, the growing importance of stablecoins, which are a type of backed crypto asset used to make payments, has prompted cross-border payment platforms like MoneyGram to start considering the use of stablecoins to help. speed up cross-border transactions.
A recent report from crypto data aggregator, CoinGecko, indicates that more than $ 133 billion in tokens have been issued by stablecoin issuers. With this in mind, HM Treasury has made proposals to create a regulatory regime for stablecoins and bring them under the regulatory jurisdiction of the Bank of England.
Digital currencies pose no risk to the UK financial network
In its recently released Financial Stability Report, the FSB indicated that crypto assets currently pose little direct risk to UK financial stability. However, the report also recognizes that a number of financial stability risks could arise as digital assets continue to grow and become more integrated with traditional financial networks.
The FSB pointed out that 95% of the $ 2.6 trillion crypto industry is made up of unprotected digital assets. Unsecured assets are crypto tokens with no underlying intrinsic value, which makes them vulnerable to major price corrections.
If institutional investors were to put their clients’ money in such crypto assets, a sharp drop in the asset’s valuation could cause investors to sell other financial assets to cover their losses and inadvertently cause an overflow into the asset. the country’s financial network.
It is because of the volatile nature of crypto assets that the FSB has called for improved regulatory and law enforcement frameworks, both in the UK and globally, to encourage the sustainable innovation, manage risk and maintain the integrity of the financial network. .