Crypto assets have grown rapidly from just $16 billion five years ago to about $2.3 trillion today, and thus could pose a systemic risk to the global financial system, the Bank of England said on Wednesday.
- While $2.3 trillion is small compared to the $250 trillion global financial system, it doesn’t take much to destabilize things. The sub-prime debt market was valued at around $1.2 trillion in 2008, just before the financial crisis, noted the BoE’s Jon Cunliffe, the bank’s deputy governor of financial stability in a speech.
- ”In that case, the knock-on effects of a price collapse in a relatively small market was amplified and reverberated through an un-resilient financial system causing huge and persistent economic damage,” Cunliffe said.
- Cunliffe said that because the crypto industry is growing rapidly and beginning to connect to the traditional financial system, with the emergence of leveraged players and in a mostly unregulated space, systemic risks, while limited now, could grow very quickly.
- He said that regulation should be “pursued as a matter of urgency” and quoted SEC chair Gary Gensler’s recent comment that “financial innovations throughout history do not flourish outside public policy frameworks.”
CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.