Crypto assets pose limited” risks to the stability of the UK financial system – regulation

The Bank of England says crypto assets pose “limited” direct risks to the stability of the country’s financial system. "Cryptoasset and its associated markets and services are growing and developing rapidly. Such assets are becoming increasingly integrated into the financial system," described the British central bank.

Crypto poses limited risks to the UK’s financial stability

The Bank of England's Financial Policy Committee (FPC) published the October edition of the Financial Stability in Focus report on Friday.

The Financial Policy Committee consists of 13 members, six of whom are Bank of England staff, including the Governor and four Deputy Governors. The FPC “identifies, monitors and takes action to eliminate or reduce systemic risks in order to protect and strengthen the resilience of the UK financial system,” the central bank described.

The committee wrote:

Cryptoasset and its associated markets and services are growing and developing rapidly. Such assets are increasingly integrated into the financial system. The FPC judges that direct risks to the stability of the UK financial system from crypto assets are currently limited.

“However, regulatory and law enforcement frameworks, both domestically and globally, must keep pace with developments in these rapidly growing markets to manage risks and maintain broader trust and integrity in the financial system,” the committee added.

The Committee further noted that it will “continue to pay close attention to developments, including the relationship between crypto assets and the UK financial system, thereby seeking to ensure resilience to systemic risks that may arise from further developments in crypto asset markets,” and concluded:

The FPC believes that financial institutions should exercise caution and caution when acquiring these assets.

Earlier this month, the International Monetary Fund (IMF) warned that the rising popularity of cryptocurrencies poses new challenges to financial stability as it could “reduce the ability of central banks to effectively implement monetary policy” and “create financial stability risks.”

In July, Bank of England Deputy Governor Jon Cunliffe said that cryptocurrencies not big enough pose a risk to financial stability. “They are not so large that they would pose a risk to financial stability and they are not deeply integrated into the permanent financial system,” the deputy governor said.

What do you think of the Bank of England’s comments on crypto assets? Let us know in the comments section below.

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