A senior official at the Bank of England has called digital currency regulation a “matter of urgency” for financial stability, citing the risks posed by digital currencies to the wider financial system.
Deputy Governor of the Bank of England, Jon Cunliffe said the risks posed by stablecoins in particular, as well as decentralized trading and derivatives trading on unbacked assets, were sufficient prospects to require a more hands-on regulatory approach.
While the central bank official noted that the risks at present were small, he said the risks depend on “the degree of interconnectedness between crypto and the conventional financial sector.”
With digital currency and the mainstream financial sector becoming ever closer, it could be said that these risks are only continuing to grow.
The deputy governor cited the slow pace of development in regulation, which he said authorities should pursue “as a matter of urgency.”
“Financial stability risks currently are relatively limited but they could grow very rapidly if, as I expect, this area continues to develop and expand at pace. How large those risks could grow will depend in no small part on the nature and on the speed of the response by regulatory and supervisory authorities.”
The Bank of England has been developing policy around digital currency for several years now, both in its role as a monetary authority in the U.K., and in developing plans for a U.K. central bank digital currency—a digital pound sterling.
Cunliffe recently helped establish a joint task force with HM Treasury’s Katharine Braddick to take a combined authority approach to digital currency issues in the country.
With regulation for digital currency and the Bitcoin sector still taking its shape in the U.K., the deputy governor’s statements will be seen as influential in shaping the response from the country’s lawmakers.
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