Regulators need to “get the job done” to bring the use of cryptography within the “regulatory boundaries,” says John Cunliff, Deputy Governor of Financial Stability at the Bank of England.
Cunliffe, who spoke at the British High Commissioner’s residence in Singapore on Tuesday, said recently:Crypto Winter“This refers to the period of decline in crypto prices that has remained low for a long time.
Finance has its own risks, and technology can change the way risk is managed and diversified, but it cannot be ruled out, he added.
“Financial assets that have no intrinsic value are only worth paying for the next buyer. Therefore, they are inherently unstable, very vulnerable to emotions, and tend to collapse,” Cunliffe said. I am saying.
Bitcoin fell more than 70% from its record high in November to below $ 20,000 on Wednesday, the lowest level since December 2020, according to CoinDesk data.
The market capitalization of cryptocurrencies fell below $ 1 trillion as investors dumped cryptocurrencies as the sale of risky assets expanded. Down from $ 3 trillion at peak in November..
Cunliffe said cryptocurrencies could be an “immediate systemic risk” because they are not “fully integrated” into the rest of the financial system, but the boundary between the crypto world and the traditional financial system. Thinks that “it will become more and more ambiguous.”
“The question of interest to regulators is not what happens next to the value of crypto assets, but … guarantees that future innovations will increase and occur without potentially causing systemic risk. What do you need to do to do it? “
Regulators are becoming more and more Sound an alarm About cryptography, and Cunliffe The regulatory framework that embraces cryptography must be based on the iron principle of “same risk, same regulatory outcome.”
“For example, if Stablecoin is used as a’settlement asset’in a transaction, it must be as secure as any other form of money,” he said.
Stablecoin is a type of cryptocurrency that is supposed to track real-world assets, usually another currency. Many of them try to peg one-on-one with the US dollar or another fiat currency. Some of them are backed by real-world assets such as bonds and currencies.
They were designed to provide a healthy store of value to minimize price volatility.However Collapse of terraUSD (UST) — the so-called “algorithm” stablecoin fixed to the US dollar — sent a shock wave through the crypto market. Unlike other stablecoins, terraUSD was not backed by real assets. Instead, it was managed by an algorithm that tried to peg one-on-one with the US dollar. The algorithm failed.
According to Cunliffe, holders of such stablecoins will be able to redeem their coins “without losing equivalent value” with central bank or commercial bank money within a day. You need to have the right.
“Needless to say, such requirements are far from the world of Terra and Luna,” he said, plunging to 26 cents, even though he intended to maintain a one-to-one US dollar peg. Mentioned Terra USD. ..
“Regulatory standards and frameworks include levels of risk mitigation that we deem necessary. If regulations cannot be applied in exactly the same way, we must ensure that the same level of risk mitigation is achieved.”
He recommended stopping the activity “if it turns out that this is not possible with certain crypto-related activities”.
Bank of England officials said that for the “same risk, same regulatory outcome” approach to be effective, it must be carried over beyond international standards and incorporated into the national regulatory system.
England The Financial Stability Board plans to publish a consultation report later this year, including recommendations to promote international consistency in the regulatory approach to non-stablecoin crypto assets, markets and exchanges. He added.
He said innovators, regulators and public authorities are interested in developing appropriate regulations and managing risk.
“It is only within such a framework, [innovators] It can really prosper and secure the benefits of technological change, “Cunliffe added.