The Deputy Governor of the Bank of England, Jon Cunliffe, stated that crypto regulations should be designed on a “same risk, same regulation” principle.
Jon Cunliffe gave a speech on July 12 where he spoke about some of the key lessons from the crypto winter. He emphasized the importance of speeding up a regulatory framework for crypto.
Cunliffe spoke about the recent happenings in the crypto space. With tumbling crypto prices and destabilized crypto firms, the crypto bear market has proven to be difficult for many. He added that even though crypto provides aid in the improvement of finance, proper regulation should be set in place to minimize the risks associated with it.
“Crypto–technologies offer the prospect of substantive innovation and improvement in finance. But to be successful and sustainable innovation has to happen within a framework in which risks are managed: people don’t fly for long in unsafe aeroplanes,” said Jon Cunliffe.
Cunliffe stated that the majority of crypto assets have no intrinsic value
Cunliffe used the example of the previous months to highlight several cryptocurrencies and their lack of intrinsic value. He added that these cryptocurrencies are highly volatile and can go unpredictably in any direction.
He discussed bitcoin, claiming that while the coin claims to be a hedge against inflation, it is a speculative and risky asset. Cunliffe also spoke about the fall of the algorithmic stablecoin Terra and how it stressed the whole market.
Cunliffe also highlighted the dangers of using leverage in crypto trading. He stated that the losses can multiply greatly, especially when the predictions go against those of the investors.
He also stressed the importance of bringing in a regulatory framework soon. Cunliffe stated that digital assets have not yet reached a stance to pose a systemic risk.
“Or to put it the other way around, the lesson we should not take from this episode is that ‘crypto’ is somehow ‘over’ and we do not need to be concerned about it anymore.”
Jon Cunliffe
Cunliffe also stressed that the underlying technology of digital assets will be developed even into the traditional financial system. He also stated that the regulations should follow the “same risk, same regulatory outcome” principle. This means that the regulators should spread the already existing financial rules to minimize the similar risks involved in crypto.