Another day, another government official warning that Bitcoin and other cryptocurrencies could cause big, big trouble.
In a speech on Wednesday, a senior member of the UK central bank compared the rapid growth of crypto assets to the subprime mortgage-backed security market before its 2008 collapse, which was the catalyst for the 2008-09 financial crisis.
Jon Cunliffe, a deputy governor of the Bank of England responsible for financial stability, said crypto technologies hold the prospect of “radical improvements” in finance, but their current applications are now a financial stability concern.
“Crypto assets will have grown approximately 200% in 2021, from just under $800 billion to $2.3 trillion today. They grew from just $16 billion five years ago,” Cunliffe said. “As the financial crisis has shown us, you don’t have to account for a large part of the financial sector to cause financial stability problems — subprime was estimated at about $1.2 trillion in 2008.”
“If something in the financial system is growing very fast and growing in a largely unregulated space, financial stability authorities need to sit up and take notice.”
Regulators mentioning crypto has become something of a parlor game among regulators. SEC chairman Gary Gensler has called the crypto market the “Wild West”, while the IMF recently warned that cryptos could pose “financial integrity risks”.
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