- The Bank of England has warned that risk-averse assets, including equities and cryptocurrencies, remain at risk of further sharp price adjustments.
- In a new report, the bank said that the crypto market crash has exposed several vulnerabilities underscoring the need for stricter regulation and enforcement.
- The BOE said that cryptocurrencies do not yet pose a risk to the stability of the broader financial system.
Share this article
The Bank of England has also underscored the need for enhancing the regulatory and law enforcement framework.
BOE Warns Crypto Might Go Ahead
The Bank of England has warned that the pain may not be over for both the traditional and crypto markets.
one in report good Published on Tuesday, the central bank’s Financial Policy Committee said the deteriorating economic outlook has caused extreme volatility in the markets in recent months, leading to a sharp drop in the prices of risk assets such as equities and cryptocurrencies. According to the report, the crypto recession has exposed several vulnerabilities in the market that do not pose a risk to overall financial stability, but still highlight the need for stricter regulations and enforcement. read an excerpt:
“Several vulnerabilities were uncovered in cryptoasset markets similar to those exposed by previous episodes of volatility in more traditional parts of the financial system. These include liquidity mismatches leading to dynamics and driving fire sells, and the unavailability of leveraged positions. Investor confidence was weakened enough to sustain the ability of some so-called “stable coins”, especially assets with no or risky backing and low transparency. Did not take the risk to the financial stability as a whole.”
The BOE further pointed out that if the popularity of crypto and its correlation with the traditional financial system continues to grow, systemic risks to the broader economy could emerge. According to the central bank, it underscore The need for an “advanced regulatory and law enforcement framework” addressing developments in these markets and activities.
While the BOE called for tighter crypto regulation, it did not suggest any new rules for traditional assets such as stocks. Notably, the stock market has lost more than $11 trillion since the beginning of the year, which is roughly 3.6 times the total value of the cryptocurrency market at its peak.
Shares of several so-called blue-chip technology companies, including Meta, Netflix, PayPal and Shopify, have posted brutal declines of 52.7%, 69.8%, 63.3% and 77% on a year-on-year basis. No regulatory attention. Bitcoin is down about 55% over the same period.
Despite a significant market correction already in place, the BOE reiterated that the pain may not be over for equities and cryptocurrencies. “Given risks from additional supply shocks, faster-than-expected monetary policy tightening and slower-than-expected economic growth, riskier asset prices remain vulnerable to further sharp adjustments,” it said. .
Disclosure: At the time of writing, the author of this article owns ETH and several other cryptocurrencies.