BoE says Institutions Are Not A ‘Large Part’ of the Crypto Space to Warrant Action
But the central bank is keeping a careful watch because crypto is a “fast changing landscape.”
Bank of England (BoE) says crypto-assets do not pose a threat despite becoming more interlinked with big investors, at least no action beyond monitoring for now.
Price volatility in certain crypto assets could highlight “potential pockets of exuberance,” said BoE in its twice-yearly Financial Stability Report (FSR) on Tuesday.
Crypto assets are currently largely held by retail investors, with institutional investors having limited exposure at present, it added.
But at the same time, there are signs of growing interest in cryptocurrencies and related services from banks, institutional investors, and key payment system operators said the UK's central bank.
However, this growing interest from big players can increase the interlinkages between crypto-assets and other systemic financial markets and institutions, the FSR said.
While repeating his warning that crypto investors can lose all of their money because crypto assets have “no intrinsic value,” BoE Governor Andrew Bailey said while institutions are not a big part of the crypto space, the rapidly changing industry requires attention.
“From an institutional point of view, the evidence does not point to it being a large part of the picture, but we clearly have to watch it very carefully, as we do, because it is a fast changing landscape.”
BoE Deputy Governor Jon Cunliffe also joined in, saying “high speculative” crypto-assets were being observed to see if any action is needed to protect retail investors.
“From a financial stability point of view, the point at which you act is the point where you think, well actually you have a risk that is beginning to crystalize,” said Cunliffe, adding that such a moment hadn’t been reached.