LONDON, Nov 21 (Reuters) – The implosion of cryptocurrency exchange FTX shows the need to bring the crypto world under a regulatory framework, Bank of England Deputy Governor Jon Cunliffe said on Friday.
FTX, which has been filed for US bankruptcy court protectionhas said that the debt of its 50 largest creditors is nearly $3.1 billion.
“While the world of crypto, as shown in the crypto season last year and the implosion of FTX last week is now not large enough or sufficiently connected to mainstream finance to threaten the stability of the financial system, its relationship with mainstream finance has developed rapidly. “said Cunliffe.
He added that FTX’s woes highlighted the need for regulators to take control more quickly. It doesn’t have a license to operate in the UK, but it’s already making waves.
“We don’t have to wait until they are big and connected to develop the regulatory framework necessary to prevent a crypto shock that could have a larger destabilizing effect,” Cunliffe said at the Warwick Business School event.
Currently, crypto companies in the UK only need to demonstrate that they can implement sufficient controls to stop money laundering, although many companies have had license applications rejected by the UK’s Financial Conduct Authority (FCA).
The UK approved a new financial services and markets law that will introduce regulation for stablecoins, cryptoassets backed by assets such as currencies and the marketing of cryptoassets in general.
Cunliffe said that the BoE will set out a public consultation to flesh out the rules for stablecoins in more detail and how coinholders’ claims on the issuer and the wallet should be structured to send redemption on par with commercial bank money.
“The FTX example underscores the importance of these aspects,” Cunliffe said.
The finance ministry will also soon consult on extending investor protection, market integrity and other regulatory frameworks covering the promotion and trading of financial products to activities and entities involving crypto assets, he added.
Jane Moore, head of payments and digital assets at the FCA, said that crypto will, in one way or another, shape the future of financial services and therefore consumer protection must be considered.
Separately, the BoE and the finance ministry see the potential for a digital pound.
Cunliffe said his initial findings were that the failure of FTX would have no potential long-term implications for the digital currency. However, on reflection, he says that the interconnected nature of the digital world makes sense.
“Our aim is to ensure that innovation is possible but within a framework where risk is properly managed,” Cunliffe said. “Last week’s events provided an interesting demonstration of what matters.”
Reporting by Marc Jones and Huw Jones, Editing by Louise Heavens
Disclaimer: The views expressed in this article are those of the author and may not reflect those Kitco Metals Inc. Stock price history The author has made every effort to ensure the accuracy of the information provided; However, Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. It is not a request to make an exchange of commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and / or damage arising from the use of this publication.