Crypto assets like Bitcoin could soon pose a risk to the entire financial system, a Bank of England deputy governor warned.
Jon Cunliffe said regulators need to have the right regulations.
“The point at which [crypto assets] poses a danger, draws nearer. I think regulators and lawmakers need to think twice about this, ”Cunliffe told the BBC.
“In regulating the management of crypto assets … we need to start by making sure that regulation is in place.”
The cryptocurrency markets have swelled to nearly $ 3 trillion (£ 2.2 trillion), according to the Coin Market Cap website, which tracks the value of digital coins.
Fear grows that if they fall victim to fraud, fraud, or market manipulation, ordinary investors, with limited remedies, could be harmed.
Regulators have been slow to react to the rapid rise of crypto, but are starting to become aware of the dangers.
This month, a report from a U.S. Treasury Department called stablecoins – a type of digital asset purported to be pegged to the value of a traditional currency – identified one of the greatest threats to the financial system.
The Presidents’ Working Group on Financial Markets recommended “urgent” legislation to ensure that issuers of stablecoins like banks are regulated.
U.S. regulators have taken a tougher stance on stablecoins, including Tether, which is by far the largest of the assets with around $ 76 billion in tokens in circulation.
Tether – the company behind the stablecoin of the same name – has transacted several million dollars this year with both the New York Attorney General (NYAG) and the Commodities and Futures Trading Commission (CFTC). Both organizations found that Tether’s claims that its currency was fully backed by US dollars held in reserve were not true.
Tether is also reportedly under investigation by the Securities and Exchange Commission (SEC). The company and its executives deny wrongdoing.
Bank of England Governor Andrew Bailey warned last year that crypto assets could be worthless and that investors risk losing all of their money
The bank plans to launch a consultation next year to create its own digital currency called “Britcoin”.
The bank will work with the Treasury Department to assess the need for a digital currency from the UK Central Bank (CBDC), a statement said last week. However, it was said that there would be no currency until 2025 at the earliest.
The consultation examines what further work is needed to develop the technology needed to support digital money.