According to Jon Cunliffe, the Bank of England Deputy Governor for Financial Stability, crypto could threaten the financial system in an immediate manner.
Cunliffe, in an interview for the BBC's "Today" show on Nov. 15, said that digital assets could soon pose systemic risks due to their rapid growth and integration with traditional financial services.
As [cryptocurrencies] grow rapidly, they are becoming more integrated into what might be called a traditional financial system.”
As a result, they are getting closer to posing a risk. He said legislators and regulators need to think very hard about that.
Despite Cunliffe's warnings about the integration of volatile crypto assets into mainstream financial systems, he dismissed adjacent concerns about stablecoins.
He said there are proposals to allow social media platforms and some of the big tech platforms to launch their own currencies. "I do not think we're behind the curve on those proposals because they do not exist at scale yet."
One month ago, Cunliffe called for crypto regulation as a "matter of urgency" during an address to the Society for Worldwide Interbank Financial Telecommunications.
Cunliffe acknowledged that "crypto technologies offer a prospect of radical improvements in financial services," but he emphasized that there are significant risks associated with this sector, such as price volatility, a lack of consumer protection laws, and non-existence of anti-money laundering provisions.
Cunliffe said the size of those risks depends on a number of factors, including the rapidity with which regulatory and supervisory authorities respond.
The U.K. Treasury and British central bank released an announcement on Nov. 9 describing an upcoming study to produce a central bank digital currency (CBDC).
The duo plans to launch a consultation in 2022 to examine the feasibility of UK CBDCs, explore the features of potential designs, and consider the advantages and disadvantages of issuing a CBDC.
BoE also noted that it has not yet made a decision on launching a CBDC of its own.