Bank of England (BOE) has reiterated its plans to review the regulatory framework for crypto assets. The bank’s Financial Policy Committee (FPC) noted that cryptocurrencies pose “risks to financial stability” that need to be addressed in the financial sector.
The bank also cited sanctions related to the ongoing Russian-Ukraine crisis and reasons why a good regulatory framework should be prioritized.
This is in line with the thoughts of bureaucrats and financial regulators around the world who are concerned that Russia could use crypto to evade economic sanctions.
Regulators have access to the cryptography regulatory framework
The BOE board has been highly critical of the cryptocurrency economy. Last November, BOE Governor Andrew Bailey stated that El Salvador’s new Bitcoin law could pose a major problem for the financial system. The South American country turned Bitcoin into legal tender and allowed goods and services to be paid for with digital currency.
In October last year, Sir Jon Cunliffe, deputy governor of the Bank of England for financial stability, expressed concern that crypto assets could plummet to zero. However, the recent report puts more emphasis on the financial stability that the cryptocurrencies can bring to the UK’s financial system.
Crypto Risk Exposure To The Wider Financial System Is Still Low
According to the report, the level of risk of cryptocurrencies exposure to the financial system in the UK is currently limited.
The report referred to the interconnectedness and limited size of crypto compared to the broader financial system.
But crypto assets could pose financial stability risks in the future if the industry maintains this level of growth and increases its level of interconnection with the wider financial system.
The proposal for a standard regulatory framework for cryptocurrencies has intensified since Russia’s invasion of Ukraine. After the FPC meeting, it is clear that the BOE wants to categorize crypto assets under the same financial group as traditional financial assets.
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