Bank of England: Crypto Assets Pose ‘Limited’ Risks to Stability of UK Financial System

Bank of England: Crypto Assets Pose 'Limited' Risks to Stability of UK Financial System

The Bank of England says that crypto assets poselimiteddirect risks to the stability of the countrys financial system. “Cryptoasset and associated markets and services continue to grow and to develop rapidly. Such assets are becoming increasingly integrated into the financial system,” the U.K.s central bank described.

Crypto Poses Limited Risks to UKs Financial Stability

The Bank of Englands Financial Policy Committee (FPC) published the October edition of theFinancial Stability in Focusreport Friday.

The Financial Policy Committee has 13 members, six of whom are Bank of England staff, including the governor and four deputy governors. The FPCidentifies, monitors and takes action to remove or reduce systemic risks with a view to protecting and enhancing the resilience of the U.K. financial system,” the central bank described.

The committee wrote:

Cryptoasset and associated markets and services continue to grow and to develop rapidly. Such assets are becoming increasingly integrated into the financial system. The FPC judges that direct risks to the stability of the UK financial system from cryptoassets are currently limited.

However, regulatory and law enforcement frameworks, both domestically and at a global level, need to keep pace with developments in these fast-growing markets in order to manage risks and to maintain broader trust and integrity in the financial system,” the committee added.

The committee further noted that itwill continue to pay close attention to developments, including the relationship between cryptoassets and the U.K. financial system, and thereby seek to ensure resilience to systemic risks that may arise from further developments in cryptoasset markets,” concluding:

The FPC considers that financial institutions should take a cautious and prudent approach to any adoption of these assets.

Early this month, the International Monetary Fund (IMF) warned that the rising popularity of cryptocurrencies posed new challenges to financial stability, stating that it couldreduce the ability of central banks to effectively implement monetary policyandcreate financial stability risks.

In July, Bank of England Deputy Governor Jon Cunliffe said that cryptocurrencies were not big enough to pose financial stability risk. “Theyre not of the size that they would cause financial stability risk, and theyre not connected deeply into the standing financial system,” said the deputy governor.

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