Bank of England Says Yes to Cryptos, But Not Outlaws

End of the Wild West of cryptos? – Unlike the European Union and its problems MiCA lawthe authorities of UK seem to have come to their senses concerning I’hyper surveillance cryptocurrencies. Even though Bitcoin and its ilk are not seen as an outsized threat across the Channel, a regulatory framework specific (and strict) is still strongly desired by the Bank of England.

The Bank of England (a little bit) less hostile to cryptos

In general, the central bankers around the world have at least one thing in common: they don’t like bitcoin and crypto-assets. These great fundraisers usually prefer their own project of central bank digital currency (MNBC)… with a few exceptions, such as at salvador of course or more recently in the Central African Republic.

On the side of the Bank of England (BoE), we seem to want let the cryptos livebut not without a serious regulatory framework. In any case, this is what emerges from a Financial Policy Committee of this central bank.

In a report of this meeting, published on July 5, 2022, we first learn that thegrowing crypto-assets “does not pose an immediate threat” for the resilience of the UK financial system. However, this exponential adoption could have this destabilizing capacity ” in the future “.

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A “strengthened regulation” to avoid the advent of Bitcoin?

Like other institutions and political leaders, the Bank of England is based on the succession of disasters generated by the fall of the stablecoin UST of Terra (LUNA). Bankers indeed recall – certainly with intense satisfaction – that the crypto-asset market has experienced “extreme volatility” these last 2 months.

The BoE mentions in particular the fact that the valuation total crypto market has fallen from $3 trillion at the end of 2021 to just 900 billion dollars today. The criticisms are numerous: “liquidity mismatches”, “leveraged positions” and the loss of trustworthy in stablecoins (especially algorithmic ones), among others.

“These events did not pose risks to financial stability [britannique] in general. But if we do not remedy this, systemic risks could appear, if cryptocurrencies, and their interconnections with the traditional financial system, continue to develop. This highlights the need to strengthen regulatory and law enforcement frameworks to deal with developments in these markets and activities. »

BoE statement

Surprisingly enough, this committee of the Bank of England does not mention the question of a pound sterling digital. Yet MNBCs tend to be of great interest to fellow central bankers in the rest of the world. Indeed, China is already very advanced on its digital yuan. The United States and his Federal Reserve (Fed) are starting to worry about set up a digital dollar.

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