thecoinrise.com
Sir Jon Cunliffe, the deputy governor for financial stability at the Bank of England (BoE) has expressed worries over the potential risks that digital currencies can cause to the financial ecosystem of the United Kingdom. Based on these concerns, Sir Cunliffe is recommending that lawmakers look into regulating the fast-growing cryptocurrency ecosystem.
While these cryptocurrencies do not pose an immediate threat to the country’s financial system in the short term, Sir Cunliffe believes that if left unaddressed, their inherent volatility can spill into the traditional markets.
“My judgement is they’re not, at the moment, a financial stability risk, but they are growing very fast, and they’re becoming integrated more into what I might call the traditional financial system,” said Cunliffe. “So the point at which they pose a risk is getting closer. I think regulators and legislators need to think very hard about that.”
While many, including retail and institutional investors, see digital currencies as revolutionary, bothering on the speed, decentralized nature of their transactions, and security, governments and regulators are wary of investor protections due to the high instability of Bitcoin and other altcoins. Various regulators around the world are exploring different avenues to keep the impact of these assets under control including the UK’s Financial Conduct Authority.
Bank of England to Combat Crypto Dominance Through CBDCs
One of the avenues the UK government and the Bank of England are exploring to combat the dominance of digital currencies is the development of a Digital Pound. While it has commenced work in this regard, the BoE plans to launch a consultation in 2022 in order to seek insight from key stakeholders with respect to the proposed development.
While the fundamental framework is to create something similar to a stablecoin, pegged to the Pound, the final launch is notably years away as the bank will need to finalize on several key considerations upon which the CBDC will operate.
“The reason why we might consider, why we’re actively exploring introducing the digital pound digital form of Bank of England cash, is that the way we live and the way we transact is changing all the time,” Cunliffe said. “The question is whether the public at large, businesses and households, should really have the option of using and holding the safest form of money — which is Bank of England money — in their everyday lives. That’s the question that we’ll explore in this taskforce between the Treasury and the Bank of England over the next year.”