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The crypto penny finally drops for the Bank of England

By Ian Silvera
16 December 2021

By Ian Silvera

“We really need to roll our sleeves up and get on with [a regulatory framework for crypto]”, Sir Jon Cunliffe conceded to the British nation over breakfast earlier this week. The deputy governor of the Bank of England appeared on the BBC’s flagship current affairs radio show, the Today Programme, to talk about the bank’s latest Financial Stability Report and make some vague pronouncements about the cryptocurrency industry.

After recognising the fast growth of the industry and that more than 2.3m people in the UK now have exposure to the digital tokens, he warned that integration into the mainstream financial system could considerably harm established market players, because of the extreme price volatility of crypto.

This is nothing new and the FCA has been running its own advertisements warning retail investors about the potential perils of backing blockchain projects, whilst advertising watchdog the ASA recently issued its own rebukes to no less than seven crypto companies over their marketing efforts in the UK.

What was new, was Cunliffe’s call for the regulatory framework. The deputy governor said this would be important to mitigate future risks. But such a set of government-backed rules and laws would also be helpful to those in the industry who desperately want some political and legal guidance over what is permissible and what is not. For those in the decentralized finance space however, such a set of rules would go down like a cup of cold sick and be potentially ignored.

The most perverse thing about the whole situation is that London and the UK at-large often and rightfully trumpet themselves as one of the world’s leading financial centres and a leader in the fintech space, with Boris Johnson appointing Network International Chairman Ron Kalifa to lead a review into this sector.

That report also recommended a “bespoke regime” for cryptocurrencies. “While being tailored to the risks arising from cryptoasset-related activities. It should also be flexible enough to deal with future challenges – such as how DeFi should be regulated,” Kalifa wrote.

The reality is that this still hasn’t happened, and the UK is lagging far behind the US and New York in particular when it comes to crypto regulations. The opportunity window is quickly closing for Britain on crypto.