While speaking at Warwick Business School, Jon Cunliffe, who is the deputy governor of the Bank of England, mentioned that the events that have occurred over the past few months demonstrate that crypto is highly susceptible to the dangers that regulatory authorities could monitor. He made this statement about the fact that traditional finance is intended to prevent these dangers.
Jon Cunliffe, has repeated (1) his position that there is a need to govern cryptocurrencies, especially in light of the collapse of FTX.
Cunliffe underscored the expanding linkages between the conventional banking markets and trading in crypto assets. He highlighted the need to supervise crypto assets before they can damage the larger financial system.
Cunliffe described cryptocurrencies as a "gamble" that ought to be controlled in a manner analogous to those of other operations inside the financial sector.
Regulate Crypto 'Same Way that a Casino is Regulated'
The official from the BOE issued a warning that trading cryptocurrencies are "extremely risky" if serious attention in terms of supervision is not paid to it and that it may pose "a systemic problem" if no action is done.
"In my opinion, it is a gamble, but we allow people to bet, so if you want to participate, you should be able to do so in a venue that is regulated in the same way that a casino is regulated. Since we allow people to bet, you should be able to do so in a venue that is regulated in the same way that a casino is regulated."
There is not yet a definitive rule that regulators & governments have produced about whether or whether they should regulate cryptocurrencies and how they should do so.
Some people believe that the industry should be permitted to continue operating in its "decentralized" form without any interference from the government since this would lend credibility to a sector that does not pose an immediate risk to the country's capacity to maintain its financial stability.
Cunliffe pointed out, however, that trading crypto assets do not provide a big risk that can upset the financial sector. Still, it is beginning to build ties to the monetary system.
The governor's statements come exactly one month after the sudden failure (2) of the cryptocurrency exchange FTX, which sent shockwaves across the landscape of cryptocurrencies and caused a serious blow to large enterprises operating in traditional finance.
Ambitions of UK as a Global Crypto Hub
Because of the demise of FTX, more than one million customers were unable to withdraw their assets, which were estimated to be worth eight billion dollars.
On Wednesday, former FTX CEO Sam Bankman-Fried was turned over to prosecutors in the United States by authorities in the Bahamas, where he had been held for the previous eight days. The Bahamas is where the headquarters of the cryptocurrency exchange was located.
The next day, a federal judge in New York decided that Bankman-Fried should be allowed to post bond for $250 million while awaiting trial on various fraud and other criminal offenses.
In the meantime, attempts by British authorities to enforce compliance on international cryptocurrency exchanges have not been successful.
Rishi Sunak, now the Prime Minister of the United Kingdom, outlined an ambition for the government in April, when he was still chancellor, to make UK into a "global hub for crypto assets." This is a vision that mostly depends on stringent regulation.
Recently, the number of people using cryptocurrencies has skyrocketed in the United Kingdom. There were roughly 10 million cryptocurrency owners in the country by the year 2021, which is a significant increase from the 1.5 million holders there were in 2018.