A senior official at the Bank of England has urged institutional investors to be “cautious” in their approach to crypto assets.
Sarah Breeden, the executive director for financial stability, strategy and risk acknowledged that crypto assets have caught the attention of the “traditional financial system,” in comments to The Times. However, she warned firms to be wary of price volatility and the use of digital assets for money laundering and terrorist financing.
Breeden described the crypto sector “a fast-moving world with growth of ten times compared to this time two years ago” in comments to the Times. She added that the Bank of England is “keeping an eye on what is happening, gathering data and ensuring we know what the regulated financial firms we supervise are up to.”
“Increasingly, it appears that interest in unbacked cryptocurrencies that have no intrinsic value is coming closer to the traditional financial system. Financial firms should be especially cautious as they approach these issues, thinking hard about risk they may involve,” she continued.
The Bank of England has issued repeated warnings that crypto could pose a risk to the global economy with Jon Cunliffe, the bank’s deputy governor for financial stability, last year warning that a “massive” crypto crash could impact on the wider financial system.
It is thought that 2.3m UK households have savings in crypto, with 0.1 per cent of household wealth stored in digital assets. The Bank of England is nonetheless concerned about accelerating crypto adoption and has been working with the Treasury, Financial Conduct Authority and International partners to build a regulatory regime that “permits innovation” while protecting consumers.
“There is not a risk to financial stability from these assets yet, but we do need to get on, roll our sleeves up and do the hard work of making sure the regulatory regime will be able to manage the risks as use of these assets increases,” Breeden said.