- The Bank of England has stated that the crypto markets currently pose little risk to the country’s financial stability
- In a recent report, the bank says that regulations need to be adopted soon to ensure this low level of risk
- Bank of England governor Andrew Bailey said last year that Bitcoin has not “caught on much”
The Bank of England has stated that the risk posed by cryptocurrency markets to the UK’s levels of financial stability are “currently limited”, echoing the views of its governor that Bitcoin “hasn’t caught on much”. A report on the current risks to the UK’s financial system entitled ‘Financial Stability in Focus’ sees the Bank of England warn that although the current crypto markets don’t pose much of a threat, regulation needs to be brought in before it becomes capable of causing instability.
Bank of England Plays Down Crypto Impact
The Bank of England’s report focuses on the UK’s ability to support families and businesses through the coronavirus recovery. Corporate debt seems to be the bank’s biggest concern, although cryptocurrencies are mentioned as being “evidence of heightened risk-taking”. This growth of crypto exposure is referenced in the report, with the inference being that they are not a risk to financial instability yet:
“Cryptoasset and associated markets and services continue to grow and to develop rapidly. Such assets are becoming increasingly integrated into the financial system. The FPC judges that direct risks to the stability of the UK financial system from cryptoassets are currently limited. However, regulatory and law enforcement frameworks, both domestically and at a global level, need to keep pace with developments in these fast-growing markets in order to manage risks and to maintain broader trust and integrity in the financial system.”
Like other financial regulators, the Bank of England is clearly concerned that the current period of grace where the market is not of a problematic size is quickly disappearing:
“Cryptoasset markets continue to grow rapidly, but currently pose limited risk to UK financial stability. Regulation needs to develop quickly enough, both domestically and at a global level, to address the risks they could pose in the future.”
For a concept that, according to its governor, has “not caught on much” and has “no intrinsic value”, the Bank of England is strangely worried about its popularity.