Sir Jon Cunliffe, the Deputy Governor of the Bank of England (BoE), has come out to bash crypto again, saying the sector poses an increasing risk to financial stability. Cunliffe shared his opinions during an interview with BBC Radio 4’s Today Programme, saying regulators are monitoring digital assets that have soared in popularity and price over the past few years.
According to him, such coins have become successful despite their volatility and technical difficulties, which inhibit their use as currencies. While he does not believe Bitcoin (BTC) and other digital assets threaten the financial system at the moment, Cunliffe voiced concerns over their growth rate.
The central banker noted that cryptos are growing and integrating into the traditional financial system rapidly. With this in mind, he said digital currencies are quickly inching towards being a threat to financial stability. To this end, Cunliffe suggested that regulators and legislators should take the matter of reining in the crypto space seriously.
Plans to develop the digital version of the pound
In the same breath, he disclosed that BoE is planning to create the digital version of the pound. Per Cunliffe, the coin is dubbed Britcoin, and will offer a safer alternative to cryptocurrencies and fiat currencies.
Cunliffe pointed out that,
“Our lives are becoming more digital. As that happens, the way we use money and the money we hold changes. The question is whether the public at large, businesses, households, should have the option of holding the safest form of money, which is Bank of England money in their everyday lives.”
Highlighting the main difference between conventional cryptos and Britcoin, Cunliffe said BTC and other cryptos have upside potential. However, their price can crash to zero. On the other hand, Britcoin will be stable and stable, according to him. He added that Britcoin would anchor and hold together the British monetary system.
He added that the central bank and the Treasury are consulting on the possible use cases of a CBDC, seeing as it could potentially lower transaction costs and speed up payments. Keeping an open mind, Cunliffe said a CBDC might also undermine the financial system, seeing as Brits might pull their funds out of commercial banks and hold the funds risk-free with BoE in the event of a recession.
Regulation will help crypto thrive
In a previous publication, Cunliffe said,
“Although crypto finance operates in novel ways, well-designed standards and regulation could and should enable risks to be managed in the crypto world as they are managed in the world of traditional finance.”
He added that bringing the crypto world within the regulatory perimeter would ensure the sector flourishes within the finance sector in a sustainable way. Nonetheless, Cunliffe said regulators need to be careful, especially when dealing with unfamiliar technologies. According to him, regulators should avoid classifying new approaches as dangerous simply because they are different.
According to him, innovation, technology, and new players can tackle longstanding frictions and inefficiencies and reduce barriers to entry. Cunliffe added that such innovation has been vital in driving improvement and increasing the resilience of financial services throughout history.