Bank of England: Cryptocurrencies should be regulated similarly to traditional finance

John Cunliffe, Deputy Governor for Financial Stability of the Bank of England, believes that the cryptocurrency industry should be regulated in the same way as traditional finance.

Jon Cunliffe recommended a set of rules for the cryptocurrency industry that would be similar to the rules in the traditional financial system in order to reduce risks in the cryptocurrency sector and increase investor confidence.

He recalled the recent collapse of the Terra ecosystem, stating that cryptocurrencies that cannot maintain their value and stability cause stress in the markets. In his opinion, investors need to be made clear that their capital is protected from deadweight losses.

Cunliff acknowledged that the potential of digital currencies in the financial system is enormous. With proper regulation, they can be fully implemented in traditional finance, so the rules should be developed in accordance with this idea. However, he did not deny that the rules will need to be “tailored” to cryptocurrencies, since the underlying technology behind them is strikingly different from the technology in the traditional financial system.

The head of the Bank of England, Andrew Bailey, joined the words of Cunliff, adding that international bodies should participate in cross-border trading in cryptocurrencies. He also stated that unsecured crypto assets have no intrinsic value and are best viewed as an investment.

Earlier, the Bank of England expressed concern about the long-term impact of cryptocurrencies on the financial system and proposed stricter regulation of the industry. In April, the financial stability division of the bank increased its budget for this fiscal year to combat the risks associated with cryptocurrencies.