Sarah Breeden, the next deputy governor of financial stability at the Bank of England (BOE), openly opined in a Parliament’s Treasury Committee hearing that cryptocurrencies currently do not possess significant threat to financial stability.
Breeden, assuming her new role from November 1, finds the underpinning technology of crypto quite beneficial. However, she cautioned about the inherent risks associated with digital assets. Crypto, as per Breeden, is an asset devoid of intrinsic value and its worth can plummet to zero, hence investors should get ready to chalk up to a total loss. Even after stressing on risks, Breeden still advocated the technological prowess of crypto to bolster the financial system.
Breeden rejected BOE’s analogy of crypto to gambling, suggesting it should correspond to a financial activity. Breeden will hold a determining influence on the regulatory trajectory of the UK’s approach towards crypto and will play an integral role in the finalization process of a central bank digital currency (CBDC).
The new deputy governor expressed her fears over the contingent risks crypto might pose if they commingle more with the conventional financial world, more so if stablecoins commence being used for payments. She pointed out events that have underscored the risks within the sector. Due to the slump in crypto prices, US banks, Silvergate, and Signature, had to face the music. Moreover, the breakdown of Terra’s UST stablecoin and the hurdles met by certain exchanges and lenders testify that those within the crypto domain are susceptible to similar risks faced in traditional finance.
Breeden called for global coordination among regulators to push for coherent and congruous ways to regulate and supervise, considering the global nature of cryptocurrency markets. She advocated the potential of CBDC to lay the solid groundwork for digital money, but she also acknowledged the pressing need to address privacy concerns while launching a digital pound.
Breeden’s tenure as the deputy governor dawns as the UK exerts more efforts to regulate the digital asset sector. June saw the country passing legislation to regulate cryptocurrencies and stablecoins as part of its extensive financial regulatory revamps post-Brexit. The new law, the Financial Services and Markets bill, has furnished regulators with the power to devise a custom-tailored framework for the digital asset sector, paving the way for crypto’s “safe adoption in the UK.” Embracing the change, however, will require a difficult balance between potential reward and associated risk.
Source: Cryptonews
