Sir Jon Cunliffe, the deputy governor of the Bank of England, said to Sky News that the Bank is considering regulating retail investors in the “casino” of crypto trading and the broader financial system from the potential crypto crisis.
He was speaking for the first time since FTX’s former CEO was detained and charged with massive fraud. According to Sir Jon, without action, crypto might create a systemic crisis and is “too dangerous” to be subject to traditional financial regulation.
When Rishi Sunak was chancellor in April, he announced the government’s intention to turn the UK into a “global hub for crypto assets.” It was a goal that largely depended on effective regulation. Regulators in the UK have attempted and failed to impose their writ on crypto exchanges based overseas.
However, Sir Jon asserts that the Bank’s regulatory actions are intended to safeguard people while preserving financial stability. Additionally, the deputy governor is in charge of that area.
There’s a lot of activity that’s developed over the last 10 years on the trading and sale of crypto assets, assets without any intrinsic value, so they’re incredibly volatile. And all of that has grown up outside of regulation.
Comparing Crypto Trading To A Casino
They saw in FTX a number of activities that went unregulated for all intents and purposes. As such, few regulations or standards were put into place to protect client funds.
It resulted in an elaborate web of frauds and schemes executed without consequence. When these financial firms didn’t provide anything resembling banking procedures – it was only natural that some clients lost out.
Sir Jon compared crypto trading to a casino, saying that investors should be free to speculate without worrying about losing access to their money:
It is in effect, in my view, a gamble, but we allow people to bet, so if you then want to get involved in that, you should have the ability to in a place that is regulated in the same way that if you gamble in a casino, it’s regulated. You should have the full information on the tin as to what you’re doing.
Institutional investors and banks are examining the risks of investing in close to $1 trillion worth of crypto. If these dangers go unchecked, then they will pose a potential threat to the financial stability of this country.
Despite not being significant enough to undermine the financial system, this trade of crypto assets was beginning to establish connections with it, according to Sir Jon.
Sir Jon asserts that:
I don’t know how that will develop. But we had banks and investment funds and others who wanted to invest in it. I think we should think about regulation before it becomes integrated with the financial system and before we could have a potential systemic problem.