The Bank of England has again urged regulation of cryptocurrencies, with the central governor today stating that “technology does not change the underlying risks in economics and finance.”
In a speech at the British High Commission in Singapore, Bank of England Deputy Governor John Cunliffe said that lessons should be learned from the “crypto winter”—highlighting Bitcoin’s plunge from its all-time high of $69,044.77 last November.
Bitcoin is today trading for $19,817.92, 71% less than its peak last year. Almost every cryptocurrency in the market is down this year as investors move away from risk assets, including crypto and equities, amid signs of a deepening recession. According to Cunliff, this is the time for regulators to step forward and protect investors from further losses.
“Crypto-technologies offer the prospect of substantive innovation and improvement in finance,” he said. “But to be successful and sustainable, innovation has to happen within a framework in which risks are managed: people don’t fly for long in unsafe aeroplanes.”
Cunliffe went on to say that most cryptocurrencies have no intrinsic value and are therefore “prone to collapse.” He also warned of stablecoins—specifically the Terra network’s UST—becoming unstable.
Stablecoins are the backbone of the cryptocurrency ecosystem and are pegged to real world assets like the euro or U.S. dollar to maintain a steady value.
But in May, Terra, a popular blockchain that many investors plunged billions of dollars into, collapsed completely when its stablecoin “depegged”—or stopped holding the same value of the dollar.
The Bank of England at the start of this month urged for tougher laws to protect the wider financial system in the future.
And it isn’t the only central bank calling for regulation: the Federal Reserve vice chair last week echoed those same calls, similarly citing significant losses among crypto investors.
Cunliffe today added that regulators must move fast to bring “the use of crypto technologies in finance within the regulatory perimeter” as the world of crypto is here to stay.
“Or to put it the other way around, the lesson we should not take from this episode [the crypto winter] is that ‘crypto’ is somehow ‘over’ and we do not need to be concerned about it anymore,” he said.