The Bank of England predicts cryptocurrency assets to become more relevant in the UK’s financial system. The Bank has stated that regulation will be needed in the future to ensure proper consumer protection.
On Friday the Bank of England published its annual Financial Stability report. Speaking of cryptos, the bank took a stricter approach than in their report in July of this year.
That report warned of a “spillover” into traditional markets. Additionally, the bank expressed concern over interest from institutional investors, banks and payments operators.
The new report said that both on a national and international level, regulation is needed. The Bank of England said on Friday: “The Financial Policy Committee (FPC) considers that financial institutions should take a cautious and prudent approach to any adoption of these assets,” (Coindesk, 2021).
The financial industries woes are no longer limited to just cryptocurrencies though. Currently, central banks are become more concerned with stablecoins in particular. Stablecoins are a class of cryptocurrency with less volatility than popular cryptos like Bitcoin (BTC) +3.40% or Ethereum (ETH) +4.20%.
Stablecoins are backed by a reserve asset, giving investors the benefits of cryptos, like privacy of payments and instant processing, while promising the same stability as the currency they are pegged to.
Due to a quick rise in popularity in stablecoins, not only from investors but also from governments, the Bank for International Settlements has published some guidelines to help regulators deal with the coins. The Bank of International Settlements is an organisation that represents most of the world’s central banks.
The BIS based its guidance on four key points: governance, risk management, settlement finality, money settlements. The BIS is careful to remind regulators though: features and functions of stablecoin arrangements can evolve, meaning more or other methods will be needed to oversee the digital asset.
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*Stock prices taken on 11.10.2021 at 09:50.
*Reback, Sheldon (08. October 2021). Coindesk: Bank of England Says Crypto Regulation Needed as Risks Grow. Last viewed on 11.08.2021 on https://www.coindesk.com/policy/2021/10/08/bank-of-england-says-crypto-regulation-needed-as-risks-grow/.
*Handagama, Sandali (06. October 2021). Coindesk: BIS Outlines How Stablecoins Could Comply With International Money Standards. Last viewed on 11.08.2021 on https://www.coindesk.com/policy/2021/10/06/bis-outlines-how-stablecoins-could-comply-with-international-money-standards/.
*Hayes, Adam (08. October 2021). Investopedia: What Is a Stablecoin?. Last viewed on 11.08.2021 on https://www.investopedia.com/terms/s/stablecoin.asp.
