The Bank of England (BoE) is seeking to partner with its international counterparts to put in place stricter regulations for digital currencies, a top official has revealed. Speaking in a recent interview, Sarah Breeden noted that the BoE can’t police the industry without global cooperation due to the cross-border and cross-sector nature of digital currencies.
Breeden acknowledged the rapid rise in adoption of digital currencies which makes it critical for regulators to oversee the industry. In an interview with The Times, she noted that digital currencies have grown past retail investors and now even U.K. banks are getting significant exposure to the sector.
Breeden, executive director for Financial Stability Strategy and Risk at the central bank, told the outlet, “The ability to get data on what institutional investors are [holding] is a challenge. This is not something the U.K. can solve all on its own.”
Currently, there is an estimated 2.3 million Britons who own digital currencies, averaging £300, or about $395 each, despite 73% not understanding them two years ago. This equates to about 0.1% of U.K.’s household wealth, a very small ratio. However, the BoE believes that the rise in exposure to retail investors and an interest by institutional holders could push this much higher in the near future. Therefore, regulating this industry is critical for the BoE, Breeden told the outlet.
“If somebody had borrowed money against that, or if some institutional investors are holding that in their portfolios, that’s when you can get the kind of knock-on effects that matter to us as the financial stability authority,” she said. “The closer those assets get to the core of the financial system, the more likely those knock-on effects are likely to be material.”
The Financial Stability Board (FSB) could spearhead the global regulation of digital currencies, according to Breeden. Her view echoes that of IMF executives who called on the FSB to formulate a regulatory framework that can shape local regulations.
The FSB was founded in 2009 following the 2008 financial crisis to monitor and make recommendations about the global financial system.
In its annual report a week ago, the BoE also identified regulating digital currencies as one of the key events that will define global finance in the upcoming year.
Watch: CoinGeek New York presentation, FYI: Better Information Tools for a More Lawful Blockchain Industry
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.
