The Bank of England on Thursday announced that it has begun drafting Britain’s first regulatory plan for the cryptocurrency amid fears its rapid growth could pose risks to future financial stability if left unchecked.
The cryptocurrency has come to the attention of policymakers amid concerns that it could be leveraged to circumvent the monetary sanctions imposed on Russia since its invasion of Ukraine.
According to the BoE's Monetary Policy Committee (FPC) in a statement, “while cryptocurrencies are not yet effective as an alternative measure to circumvent sanctions on a scale at present, behavior in that direction creates the need for regulation to maintain greater trust and integrity. in the financial system ”.
Cryptocurrencies such as Bitcoin and Ethereum are largely unregulated as they are outside the ‘scope’ of regulation and legal changes are needed to make cryptocurrencies enshrined under UK securities rules.
The FPC said the direct risks to financial stability from crypto are currently limited, but if the recent growth rate continues and is not constrained then there will be risks in the future.
The global crypto sector has grown tenfold between early 2020 and November 2021, and now accounts for $ 1.7 trillion or 0.4% of global financial assets, with over 17,000 different crypto asset tokens in circulation.
The BoE is now focused on ensuring that risks from cryptocurrencies can be controlled in the banking sector. The Financial Conduct Authority emphasizes that the firms under them must fully explain to consumers about the risks of cryptocurrencies.
The BoE is in the process of conducting a study on regulations for stablecoin and cryptocurrencies, at the same time planning to elaborate on a regulatory model.
