Bank of England: Crypto Assets Pose ‘Limited’ Risks to Stability of UK Financial System
The Bank of England says that crypto assets pose “limited” direct risks to the stability of the country’s financial system. “Cryptoasset and associated markets and services continue to grow and to develop rapidly. Such assets are becoming increasingly integrated into the financial system,” the U.K.’s central bank described.
Crypto Poses Limited Risks to UK’s Financial Stability
The Bank of England’s Financial Policy Committee (FPC) published the October edition of the “Financial Stability in Focus” report Friday.
The Financial Policy Committee has 13 members, six of whom are Bank of England staff, including the governor and four deputy governors. The FPC “identifies, monitors and takes action to remove or reduce systemic risks with a view to protecting and enhancing the resilience of the U.K. financial system,” the central bank described.
The committee wrote:
Cryptoasset and associated markets and services continue to grow and to develop rapidly. Such assets are becoming increasingly integrated into the financial system. The FPC judges that direct risks to the stability of the UK financial system from cryptoassets are currently limited.
“However, regulatory and law enforcement frameworks, both domestically and at a global level, need to keep pace with developments in these fast-growing markets in order to manage risks and to maintain broader trust and integrity in the financial system,” the committee added.
The committee further noted that it “will continue to pay close attention to developments, including the relationship between cryptoassets and the U.K. financial system, and thereby seek to ensure resilience to systemic risks that may arise from further developments in cryptoasset markets,” concluding:
The FPC considers that financial institutions should take a cautious and prudent approach to any adoption of these assets.
Early this month, the International Monetary Fund (IMF) warned that the rising popularity of cryptocurrencies posed new challenges to financial stability, stating that it could “reduce the ability of central banks to effectively implement monetary policy” and “create financial stability risks.”
In July, Bank of England Deputy Governor Jon Cunliffe said that cryptocurrencies were not big enough to pose financial stability risk. “They’re not of the size that they would cause financial stability risk, and they’re not connected deeply into the standing financial system,” said the deputy governor.
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