Despite the wonders associated with cryptocurrencies, regulators all over the world have warned about risks involved in the investment, the BoE’s deputy governor has also sent out a warning to citizens of England.
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.
“The speculative boom in crypto is very noticeable but I don’t think it’s crossed the boundary into financial stability risk,” Cunliffe told CNBC.
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.
“There are issues of investor protection here. These are highly speculative assets…But they’re not of the size that they would cause financial stability risk, and they’re not connected deeply into the standing financial system…Were we to start to see those links develop, were we to start to see it move out of retail more into wholesale and see the financial sector more exposed, then I think you might start to think about risk in that sense,”, Cunliffe told CNBC.
