BoE Governor Speaks on the Need to Regulate Crypto Assets
The BoE Governor Mark Carney spoke at the Scottish Economics Conference about the impact of developments in money and payments technologies, how BoE is helping to manage the related potential risks, and how well crypto currencies fulfil the roles of money. He also examined the need to regulate crypto currencies or crypto-assets.
According to the BoE Governor, the most fundamental reason to be skeptical about the longer term value of crypto currencies is that it is not clear the extent to which they will ever become effective media of exchange. Even though their prospects of replacing fiat money are tenuous at best, crypto currencies are of growing interest to policymakers, many of whom prefer to term them crypto-assets expressly because they are not true currencies. At present, crypto-assets raise a host of issues around consumer and investor protection, market integrity, money laundering, terrorism financing, tax evasion, and the circumvention of capital controls and international sanctions. The Financial Policy Committee of BoE is considering the risks posed to UK financial stability. Moreover, internationally, FSB will report to the G20 in Argentina later this month on the financial stability implications of crypto-assets. He added that “At present, in my view, crypto-assets do not appear to pose material risks to financial stability.”
Authorities must decide whether to isolate, regulate, or integrate crypto-assets and their associated activities. A few jurisdictions have banned crypto-assets outright. Some regulators have sealed off crypto-assets from the core of the financial system to curtail risk of contagion. Most prominently, China—which had been one of the most active crypto-asset markets—recently banned exchanges, financial institutions and payment processors from handling them. If widely adopted, however, isolation risks foregoing potentially major opportunities from the development of the underlying payments technologies. A better path would be to regulate elements of the crypto-asset ecosystem to combat illicit activities, promote market integrity, and protect the safety and soundness of the financial system. He said that “The time has come to hold the crypto-asset ecosystem to the same standards as the rest of the financial system” and “holding crypto-asset exchanges to the same rigorous standards as those that trade securities would address a major underlap in the regulatory approach.” He concluded that bringing crypto-assets onto a level regulatory playing field could catalyze private innovation to create a more resilient, effective payments system.
Related Link: Speech (PDF)
Keywords: Europe, UK, Banking, PMI, Cryptocurrencies, Crypto-assets, Digital Currency, DLT, Fintech, BoE
Previous Article
SNB Updates Reporting Forms for Capital Adequacy Under Basel IIIRelated Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards