BOE’s Jon Cunliffe says cryptos are not yet a threat to financial stability

By: Jinia Shawdagor
Jinia Shawdagor
Jinia is a cryptocurrency and blockchain enthusiast based in Sweden. She loves everything positive, travelling, and extracting joy and… read more.
on Jul 14, 2021
  • The central banker believes crypto speculation is mainly limited to retailers at the moment.
  • Per Cunliffe, speculation will threaten financial stability when it enters the wholesale level.
  • While Cunliffe finds no fault with stablecoins, he says their regulation is vital.

Jon Cunliffe, the Deputy Governor of the Bank of England (BoE), has come out to disclose that cryptocurrencies do not pose an immediate threat to financial stability. Cunliffe unveiled this news during an interview on July 14, saying the crypto sector is not big enough to pose a systemic risk to the global financial system.

In the interview, Cunliffe said that the speculative boom of the crypto market is very noticeable. However, he does not think it has not breached past the level where it can affect financial stability or the standing financial system. According to him, the impact of the highly speculative nature is more evident in the retail sector at the moment. To this end, he cautioned that investors that decide to dabble in crypto markets should be ready to lose their money because cryptos such as Bitcoin (BTC/USD) are not backed by any physical assets.

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Cunliffe added that crypto speculation can only be considered a threat if it starts spilling out of retail into wholesale. According to the central bank official, such a development would expose the financial sector to risks that might take a toll on its stability.

Varying sentiments on cryptos

While Cunliffe finds nothing wrong with stablecoins, digital assets pegged to physical assets, he said the international community should develop standards that distinguish them from other cryptos. On top of this, he believes that the international community should work on policies that regulate the stablecoin industry.

On the other hand, the Deputy Governor of the People’s Bank of China (PBoC), Fan Yifei, believes cryptocurrencies, especially stablecoins, pose a significant threat to financial systems. According to him, PBoC intends to limit the expansion of global stablecoins in China to protect the country’s monetary system against this threat.

However, the varying sentiments from both central bank officials are not exactly a surprise, seeing as China and the UK have different approaches to deal with the crypto space. While the UK is trying to find the best way to deal with the burgeoning asset class, China banned crypto trading in 2017 and prohibited Bitcoin mining this year.

As for central bank digital currencies (CBDCs), China is inching closer to issuing its digital yuan after multiple successful tests. On the other hand, the Chancellor of the Exchequer of England announced earlier this month that the Bank of England is evaluating the potential of a CBDC.

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