![Bank of England’s Cunliffe Pushes for Crypto Regulation — Sees ‘Real’ Benefits for UK Bank of England’s Cunliffe Pushes for Crypto Regulation — Sees ‘Real’ Benefits for UK](https://static.news.bitcoin.com/wp-content/uploads/2022/12/cunliffe-crypto-regulation-768x432.jpg)
The Bank of England estimates that 20% of retail and consumer deposits could potentially move toward CBDCs.
In an event streamed live on Wednesday, Bank of England governor Andrew Bailey and deputy governor for financial stability Sir Jon Cunliffe answered questions from lawmakers from the Economic Affairs Committee. When asked about the growth of innovation surrounding digital currencies in the country, Sir Cunliffe gave the following comment:
"It's quite difficult to predict how innovators will take money and actually use money going forward. But we are starting to see programmable money being used in the crypto world. And I would expect we would see a similar revolution in the functionality of money driven by technology."
Sir Jon Cunliffe discussing CBDCs | Source: Parliamentlive.tv
The Bank of England is currently exploring options to implement a digital pound CBDC for retail payments. A task force behind the CBDC is also investigating the use of a digital pound for distributing payrolls, pensions, etc.
In supporting the initiative, Sir Cunliffe cites the rapidly declining use of cash in the United Kingdom in recent years — which was greatly accelerated by the advent of the COVID-19 pandemic that discouraged physical contact in transactions. An estimated 30% of transactions in the country now occur via e-commerce.
When asked about the potential demand of a digital pound CBDC, Sir Cunliffe said:
"We've modeled a very prudent assumption, which is that basically 20% of [household and corporate transactional] deposits based in the banking system could move out of the banking system and into central bank digital money."
Nevertheless, Sir Cunliffe admitted that the current state of crypto affairs could potentially threaten financial stability within the country. The market cap on cryptocurrencies has surged to $2.6 trillion in a very short time, with an estimated 95% of digital assets being unbanked and 5% consisting of stablecoins. On the opposite side of the Atlantic, the United States has less of a positive outlook, saying that regulated stablecoins designed by the private sector make CBDCs redundant.
Bank of England's Sir Jon Cunliffe has urged British lawmakers to think “very hard” about the disruption integrating cryptocurrency with traditional finance could wreak.
Sir Jon Cunliffe, the Deputy Governor for Financial Stability at the Bank of England (BoE) crypto may pose an imminent threat to the traditional financial system.
During a Nov. 15 interview with the BBC’s “Today” program, Cunliffe argued that the rapid growth of digital assets and their integration with traditional financial services could soon pose systemic risks, stating:
“[Cryptocurrencies] are growing very fast, and they’re becoming integrated more into what I might call the traditional financial system.”
“So the point at which they pose a risk is getting closer. I think regulators and legislators need to think very hard about that,” he added.
While Cunliffe warned of integrating volatile crypto assets into the mainstream financial system, he dismissed adjacent concerns pertaining to the rise of stablecoins.
“There are proposals for new players who are not banks, including some of the big tech platforms and some of the social media platforms to come into the world and issue their own money,” he said. “I think that those proposals don’t yet exist at scale, so I don’t think we’re behind the curve here.”
The latest comments from Cunliffe come roughly one month after he addressed the Society for Worldwide Interbank Financial Telecommunication on Oct. 13, calling on policymakers to pursue crypto regulation as a “matter of urgency.”
Despite acknowledging that “crypto technologies offer a prospect of radical improvements in financial services.” Cunliffe argued that the sector poses significant risks through price volatility, a lack of consumer protection laws, and the absence of anti-money laundering (AML) provisions in the DeFi sector.
“How large those risks could grow will depend in no small part on the nature and on the speed of the response by regulatory and supervisory authorities,” Cunliffe said.
Related: London assembly member calls for ban on crypto ads in trains and buses
On Nov. 9 Britain’s central bank and Treasury released a joint statement outlining coming research into a central bank digital currency (CBDC) for the U.K market.
The duo will launch a consultation in 2022 to assess the viability of a UK CBDC, explore potential design features, and consider the positive and negative implications of issuing a CBDC.
The BoE added that “no decision” has been made to launch at CBDC at this stage.