The “similar threat, similar regulation” premise ought to information the event of cryptocurrency guidelines, in response to Jon Cunliffe, the deputy governor of the Bank of England.
On 12 July 2022, Jon Cunliffe gave a speech during which he mentioned a number of the most necessary takeaways from the crypto winter. He underlined the necessity for a fast regulatory framework for cryptocurrencies.
Cunliffe mentioned probably the most present developments within the cryptocurrency world. The crypto bear market has confirmed to be difficult for a lot of as a result of falling cryptocurrency values and unstable cryptocurrency firms. Although cryptocurrencies contribute within the improvement of finance, he continued, acceptable regulation must be put in place to scale back the dangers concerned. He mentioned,
“Crypto–applied sciences supply the prospect of substantive innovation and enchancment in finance. However to achieve success and sustainable innovation has to occur inside a framework during which dangers are managed: individuals don’t fly for lengthy in unsafe aeroplanes”
Does cryptocurrency don’t have any intrinsic worth?
Cunliffe emphasised a lot of cryptocurrencies and their lack of inherent price utilizing the instance of the previous months. He continued by stating that these cryptocurrencies are extraordinarily risky and topic to sudden adjustments in worth.
He talked about bitcoin and claimed that, regardless of the coin’s guarantees to be an inflation hedge, it’s a speculative and harmful asset. Cunliffe additionally mentioned how the collapse of the algorithmic stablecoin Terra pressured the market as a complete.
Cunliffe additionally emphasised the dangers related to utilising leverage in cryptocurrency buying and selling. He claimed that losses would possibly enhance considerably, notably when the projections differed from these of the buyers.
He additionally emphasised the need of swiftly establishing a regulatory framework. In keeping with Cunliffe, digital property are nonetheless not able to represent a systemic threat. Cunliffe additional acknowledged,
“Or to place it the opposite manner round, the lesson we must always not take from this episode is that ‘crypto’ is in some way ‘over’ and we don’t should be involved about it anymore.”
Cunliffe additionally emphasised that the prevailing banking system will ultimately incorporate the underlying applied sciences of digital property. The “similar threat, similar regulatory consequence” thought must be utilized to guidelines, he added. With a purpose to scale back the identical risks related to cryptocurrency, the regulators ought to disseminate the already in place monetary guidelines.