LONDON, Nov 21 (Reuters) – The implosion of cryptocurrency exchange FTX shows the need to bring the crypto world into the regulatory framework, the Deputy Governor of the Bank of England said on Monday. Jon Cunliffe.
FTX, which filed for protection in the US bankruptcy court, said it owed its 50 biggest creditors nearly $3.1 billion.
“While the crypto world, as demonstrated in last year’s crypto winter and last week’s FTX implosion, is currently not big enough or sufficiently interconnected with traditional finance to threaten the stability of the financial system, its links with traditional finance have grown rapidly,” Cunliffe said.
He added that FTX’s woes underscored the need for regulators to put in place tougher controls as soon as possible. He didn’t have a license to operate in Britain, but had caused waves.
“We must not wait until it is big and connected to develop the regulatory frameworks needed to prevent a crypto shock that could have a much larger destabilizing impact,” Cunliffe said at an event at Warwick Business School.
Currently, crypto companies in Britain just have to show they can put in place sufficient controls to stop money laundering, although many companies have had their license applications rejected by the Financial UK Conduct Authority (FCA).
Britain approves a new Financial Services and Markets Act that will introduce regulation for stablecoins, a crypto-asset backed by an asset such as currency, and the trading of crypto-assets in general.
Cunliffe said the BoE will hold a public consultation to further flesh out the rules for stablecoins and how coinholders’ claims on the issuer and wallets should be structured to offer redemption at par in accordance with the currency of commercial banks.
“The FTX example highlights the importance of these aspects,” Cunliffe said.
The Department of Finance will also consult soon on extending investor protection, market integrity and other regulatory frameworks that cover the promotion and trading of financial products to activities and entities involving crypto assets, a- he added.
Jane Moore, head of payments and digital assets at the FCA, said crypto will, one way or another, shape the future of financial services and therefore consumer protection must be taken. into account.
Separately, the BoE and the Ministry of Finance are studying the potential of a digital book.
Cunliffe said his initial view was that the failure of FTX would have no implications on the potential timeline for a digital currency. However, upon reflection, he said the interconnected nature of the digital world was relevant.
“Our goal is to ensure that innovation can take place but within a framework in which the risks are properly managed,” Cunliffe said. “The events of the past week provide a compelling demonstration of why this matters.”
Reporting by Marc Jones and Huw Jones, editing by Louise Heavens
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