Bank of England compares cryptocurrencies to subprime crisis and calls for urgent regulation

SAO PAULO – The deputy director of financial stability at the Bank of England (BoE), Jon Cunliffe, warned of a possible risk of a “meltdown” in the cryptoactive market, comparable to the crisis in 2008 after the burst of the housing bubble in the United States.

Speaking last Wednesday (13), Cunliffe criticized the rapid growth in the market value of cryptoactives, which jumped from $16 billion to $2.3 trillion in five years, and compared it to the $1 market. .2 trillion mortgage subprime that suddenly collapsed and caused the global stock market crash 13 years ago.

“When something in the financial system is growing very fast, and growing in a largely unregulated space, financial stability officials need to sit back and pay attention,” he said.

The British bank executive also said that cryptocurrencies are “dangerous”, and that “they have no intrinsic value and are vulnerable to major price corrections”. The combination, he says, would have the potential to endanger global financial stability.

Cunliffe argues that the risk would be inversely proportional to the regulators’ rapid response capacity, in line with the thesis that market volatility implies potential irrecoverable losses for investors.

“The forward-looking question is what could result from such events, if these cryptoactives continue to grow in scale, if they continue to become more integrated into the traditional financial sector and if investment strategies continue to become more complex?” he said.

The deputy director’s speech helps swell the chorus for regulation of the cryptoactive market, something seen as inevitable in Europe, where several agencies that oversee the capital markets have issued warnings to Binance, the world’s biggest crypto brokerage, since June.

The repression of banks against the exchange in the region began precisely in the United Kingdom, when Barclays suspended transfers to the cryptoactive exchange after an alert issued by the Financial Conduct Authority (FCA, its acronym in English).

This is not the first time that the BoE has criticized cryptocurrencies and positioned itself in favor of strict regulation of the sector. In September, bank president Andrew Bailey said Bitcoin “has no connection” with money.

On the other hand, he recalled that the bank discusses the benefits of a central bank digital currency (CBDC), a solution seen as beneficial to the traditional financial system and the main weapon against stablecoins, cryptocurrencies that have parity with fiat currencies and that would be the main threat to national currencies.

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