Bigwigs at the UK’s central bank will step up discussions with international counterparts to build a regulatory regime for crypto assets.
Sarah Breeden, executive director for financial strategy and risk at the Bank of England, said that as financial institutions including banks begin offering crypto trading and custody services to clients new rules must be designed to protect the global economy.
The Central Bank is facing “challenges” finding reliable data on crypto holdings by institutional investors said Breeden in comments first reported by the Times as she called for international co-operation to regulate and monitor digital assets.
“The ability to get data on what institutional investors are [holding] is a challenge,” Breeden told the Times. “This is not something the UK can solve all on its own.”
Currently just 0.1 per cent of UK household wealth is thought to be in crypto with an estimated 2.3m Brits holding an average of £300 in digital assets each. While the size of holdings in the UK remains small the global crypto market has this year approached a market cap of $3tn meaning the asset class presents an increasing threat to global economic stability according to the Central Bank.
“If somebody had borrowed money against that, or if some institutional investors are holding that in their portfolios, that’s when you can get the kind of knock-on effects that matter to us as the financial stability authority,” Breeden said.
“The closer those assets get to the core of the financial system, the more likely those knock-on effects are likely to be material.”
Breeden echoed comments made by the Bank of England’s deputy governor for financial stability, Jon Cunliffe, who last week outlined the pressing need for regulation as increasing numbers of financial institutions dive into the crypto space.
The process of developing regulation worldwide is already underway.
The Financial Stability Board, a body that unites central banks globally, is planning discussions on international crypto regulation Breeden said. Meanwhile both the EU and US are in the process of drawing up regulatory frameworks to give crypto businesses and institutions which hold digital assets greater clarity.
“We don’t have a regulatory framework that’s fit for crypto-coins yet, but what we are doing is rolling our sleeves up and getting ready to build it,” Breeden said.