According to Sir Jon Cunliffe, the deputy governor for financial stability at the Bank of England (BoE), crypto may pose an imminent threat to the traditional financial system.
During a Monday interview with the BBC’s Today program, Cunliffe argued that the rapid growth of digital assets and their integration with traditional financial services could soon pose systemic risks, stating:
“[Cryptocurrencies] are growing very fast, and they’re becoming integrated more into what I might call the traditional financial system.”
“So the point at which they pose a risk is getting closer. I think regulators and legislators need to think very hard about that,” he added.
While Cunliffe warned of integrating volatile crypto assets into the mainstream financial system, he dismissed adjacent concerns pertaining to the rise of stablecoins.
“There are proposals for new players who are not banks, including some of the big tech platforms and some of the social media platforms to come into the world and issue their own money,” he said. “I think that those proposals don’t yet exist at scale, so I don’t think we’re behind the curve here.”
The latest comments from Cunliffe come roughly one month after he addressed the Society for Worldwide Interbank Financial Telecommunication on Oct. 13, calling on policymakers to pursue crypto regulation as a “matter of urgency.”
Despite acknowledging that “crypto technologies offer a prospect of radical improvements in financial services,” Cunliffe argued that the sector poses significant risks through price volatility, a lack of consumer protection laws, and the absence of Anti-Money Laundering provisions in the decentralized finance sector.
“How large those risks could grow will depend in no small part on the nature and on the speed of the response by regulatory and supervisory authorities,” Cunliffe said.
The duo will launch a consultation in 2022 to assess the viability of a U.K. CBDC, explore potential design features, and consider the positive and negative implications of issuing a CBDC.
The BoE added that “no decision” has been made to launch at CBDC at this stage.