The Bank of England (BoE) anticipates greater international cooperation in establishing a regulatory regime for cryptocurrencies next year.
An increasing number of lending institutions around the world offering crypto trading and custody services to their customers requires a comprehensive regime to protect the global financial system, according to BoE executive director for financial strategy and risk, Sarah Breeden.
Breeden said that one challenge the monetary authority faced was sourcing reliable data on cryptocurrency holdings by institutional investors. She believes that international cooperation would be necessary to establish a reliable account of these figures. “The ability to get data on what institutional investors are [holding] is a challenge,” she said. “This is not something the UK can solve all on its own.” Breeden suggested the cooperation would take place between members of the Financial Stability Board, a global body of central banks, including those of the United States, Europe, Japan and Australia.
Although the BoE lacks official figures, it believes that the cryptocurrency market currently poses little threat to the broader financial system. Within Britain, some 2.3 million own crypto investments, albeit usually rather small ones. A sudden collapse in value would likely sting for these investors, but have minimal residual effects on markets.
“However, if somebody had borrowed money against that, or if some institutional investors are holding that in their portfolios, that’s when you can get the kind of knock-on effects that matter to us as the financial stability authority,” Breeden said. “The closer those assets get to the core of the financial system, the more likely those knock-on effects are likely to be material.”
Banning crypto ads
Meanwhile, other authorities in the UK have also demanded greater accountability of crypto-related firms. Last week, the UK’s advertising watchdog banned seven advertisements related to cryptocurrencies, adding that it intends to update guidance next year.
The Advertising Standards Authority (ASA) banned the ads, “for irresponsibly taking advantage of consumers’ inexperience and for failing to illustrate the risk of the investment.” As the use cases mount, the authority considers monitoring crypto ads to be “a red-alert priority issue,” according to ASA director of complaints and investigations Miles Lockwood.