The soon-to-be deputy governor of financial stability at the Bank of England (BoE), Sarah Breeden, expressed that cryptocurrencies currently do not pose a significant threat to financial stability.
While addressing the Parliament’s Treasury Committee in a recent hearing, Breeden, who will step into her new role on November 1, deliberated on the merits and dangers tied to cryptocurrencies.
While recognizing the promising prospects of the underlying technology, she also voiced concerns about the volatility of cryptocurrencies.
Breeden stated, “Cryptocurrencies are assets without inherent value, and their prices could plummet to zero. As such, investors should be ready to potentially lose their entire investment.”
Sarah Breeden, the upcoming deputy governor of financial stability at the Bank of England (BoE), emphasized the significance of the risks associated with cryptocurrencies, stating, “We’ve consistently and clearly echoed warnings about these risks.” Yet, she also highlighted, “Despite those concerns, I believe the technology behind it holds the promise to bring advantages to the financial realm.”
While reiterating the potential value of the foundational technology, she disagreed with the BoE’s likening of cryptocurrency to gambling. In her perspective, it would be more fitting to view it as a financial endeavor.
In her impending role, Breeden will be pivotal in crafting the UK’s regulatory stance on cryptocurrencies. Additionally, she will be instrumental in the deliberation and decision-making process concerning the potential launch of a central bank digital currency (CBDC).
Crypto Does Not Currently Pose Risk to Financial Stability
Sarah Breeden, at the moment, doesn’t perceive cryptocurrencies as a significant threat to the financial equilibrium.
Yet, she voiced apprehensions regarding the future implications if cryptocurrencies become more deeply entwined with the wider financial landscape. Her concerns intensify especially when contemplating the utilization of stablecoins for transaction purposes.
Breeden pointed out recent occurrences that underscore the inherent vulnerabilities in the crypto domain.
The downturn in cryptocurrency values contributed to the collapse of two American banks, namely Silvergate and Signature.
Furthermore, the implosion of Terra’s UST stablecoin and the challenges encountered by certain crypto exchanges and lending platforms underscore the fact that entities operating in the crypto realm aren’t immune to risks characteristic of the conventional financial sector.
Sarah Breeden stressed the critical role of international collaboration among regulatory bodies, considering the global reach of cryptocurrency markets. She asserted, “Due to the inherent international scope of these markets, fostering a united front among regulators worldwide is crucial to ensure a holistic and uniform approach to both regulation and supervision.”
Touching upon the subject of a central bank digital currency, Breeden suggested that it has the potential to act as a cornerstone for the future of digital currency.
Breeden recognized the imperative of tackling privacy issues that could arise with the introduction of a digital pound.
As she steps into her role as the Bank of England’s next deputy governor for financial stability, the UK is intensifying its regulatory endeavors concerning the digital asset industry.
Earlier in June, in the aftermath of Brexit, the UK introduced new legislation aimed at regulating cryptocurrencies and stablecoins as part of its expansive financial regulatory overhaul.
Termed the Financial Services and Markets bill, this legislation empowers regulators with the mandate to sculpt a specialized framework for the digital asset domain, promoting a “safe adoption of crypto in the UK.”