The British Central Bank is concerned about the long-term impact of cryptocurrencies on the financial system, and, given the market “vulnerability”, has proposed stricter regulation of the industry.
The bank’s Financial Stability Report notes that the capitalization of crypto assets has plummeted to $883 million from a peak of nearly $3 trillion last year. And while such a drop did not create risks to financial stability in general, the Bank of England believes that tougher laws are needed to protect the financial system in the future.
“A number of vulnerabilities have been found in the cryptoasset markets, similar to those identified in past periods of instability in more traditional parts of the financial system. If these vulnerabilities are not addressed, there will be systemic risks if the crypto industry continues to evolve and strengthen its connection to the wider financial system,” the report says.
Recall that earlier the Bank of England has already made a similar appeal. At the beginning of the year, the Bank’s Financial Policy Committee released a report stating that the adoption of cryptocurrencies constitutes a financial risk.
According to the bank’s experts, the industry needs stronger law enforcement and regulations. The Central Bank also mentioned stablecoins, stating that such assets need to be regulated just as strictly. Without regulation, stablecoins cannot provide the same security as central or commercial bank money.
Previously, the Prudential Regulation Authority (PRA) of the Bank of England increased its budget for the upcoming financial year as part of the fight against the risks associated with digital assets.
Source: Bits
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