(Reuters) – A collapse in cryptocurrencies is a "likely scenario" and rules are needed to regulate the fast-growing sector as an "urgent matter", the Bank of England's Deputy Governor Jon Cunliffe said on Wednesday.
The risks to financial stability from the application of cryptotechnology are currently limited, but there are a number of "very good reasons" to believe that this may not be the case much longer, Cunliffe said.
"Regulators internationally and in many jurisdictions, work has begun. It must continue," Cunliffe said in a speech to the SIBOS conference. $ 2.3 trillion, with 95% of them, including bitcoin, without security from any asset or fiat currency, said Cunliffe.
"But as the financial crisis showed us, you do not have to take into account a large part of the financial sector to trigger financial stability problems-sub-prime was valued at about $ 1
" Such a collapse is indeed a likely scenario, with given the lack of intrinsic value and thus price fluctuations, the probability of transmission between cryptocurrencies, cyber and operational vulnerabilities, and of course the power of crew behavior they, says Cunliffe.
Connections between cryptocurrencies and the traditional financial system are also growing as large investors, hedge funds and banks become more involved, says Cunliffe. "Challenges given the lack of investor protection and the BoE have begun work on how such risks can be managed," he added.
Last week, the global regulator suggested that the safeguards they apply to systemic clearing houses and payment systems should also be applied to stablecoins, a type of cryptocurrency that is usually backed by an asset or fiat currency, but they make up only 5% of cryptocurrencies.