Deputy Governor Jon Cunliffe of the Bank of England commented on crypto’s market position, stating that it is not a financial stability issue because it does not yet represent relevant competition to established markets.
He agreed with and praised crypto’s rapid growth, but he underlined that it cannot compete with the regulated market and that it is not a threat to him.
Cunliffe told us, “The speculative rise in crypto is definitely evident, but I don’t think it’s passed the border into financial stability concern.”
Volatile cryptocurrency is a retailer’s preference, not an institutional one.
Due to the volatile nature of cryptocurrency, excessive outputs are common. The ultimate product line will either head north or south. The crypto market has risen as high as $2.5 trillion in the first quarter of 2021 but has also experienced unanticipated losses of almost $1 trillion in value since May. Bitcoin is currently trading at $32,500, down roughly 50% from its April high of near $65K.
Cunliffe, on the other hand, said that cryptocurrency’s appeal is unrelated to traditional markets because it is limited to retail investors and institutions have yet to express a collective interest.
“Here, there are concerns about investment protection. These are investments that are very speculative… However, they aren’t large enough to pose a threat to financial stability, and they aren’t tightly linked to the existing financial system… “I believe you might start to think about risk in that sense if we start to see those links expand if we start to see it move out of retail more into wholesale and see the banking sector become more exposed,” Cunliffe said.
Regulators and the Cryptocurrency Crackdown
Regulators still envision unending trekking through the woods in search of an unguaranteed treasure, regardless of crypto’s magical days. The traditional market actors, for example, were unsurprised by China’s swift and ferocious crypto crackdown.
The crackdown was intended as a purge of the unprotected, unsustainable, and uncontrolled cryptosystem in China. Furthermore, companies like Binance, the world’s largest crypto trade and exchange platform, are mired in a slew of regulatory issues in a number of countries, including the United Kingdom.
Instead of failing to meet the UK’s anti-money laundering regulations, Binance’s operations were suspended by the Financial Conduct Authority (FCA) in June.