The implosion of cryptocurrency exchange FTX shows the need to bring the crypto world within the regulatory framework, Bank of England (BOE) Deputy Governor Jon Cunliffe said yesterday.
FTX, which has filed for US bankruptcy court protection, said it owes its 50 biggest creditors nearly US$3.1 billion.
“While the crypto world, as was demonstrated during last year’s crypto winter and last week’s FTX implosion is not at present large enough or interconnected enough with mainstream finance to threaten the stability of the financial system, its links with mainstream finance have been developing rapidly,” Cunliffe said.
Photo: Reuters
He added that FTX’s woes highlighted the need for regulators to put in place tighter controls as quickly as possible.
It did not have a license to operate in Britain, yet had caused waves.
“We should not wait until it is large and connected to develop the regulatory frameworks necessary to prevent a crypto shock that could have a much greater destabilizing impact,” Cunliffe told a Warwick Business School event.
Crypto firms in Britain only have to show they can put in place sufficient controls to stop money laundering, although many firms have had license applications rejected by the UK Financial Conduct Authority.
Britain is approving a new financial services and markets law that would introduce regulation for stablecoins, a cryptoasset backed by an asset such as a currency and marketing of cryptoassets generally.
Cunliffe said that the Bank of England would set out a public consultation to flesh out rules for stablecoins in more detail and on how coinholders’ claims on the issuer and wallets should be structured to deliver redemption at par in line with commercial bank money.
“The FTX example underlines how important these aspects are,” Cunliffe said.
The British Treasury would also consult soon on extending the investor protection, market integrity and other regulatory frameworks that cover the promotion and trading of financial products to activities and entities involving crypto assets, he added.
Jane Moore, head of payments and digital assets at the Financial Conduct Authority, said that crypto would, one way or another, shape the future of financial services and therefore consumer protection must be considered.
Separately, the Monetary Authority of Singapore (MAS) defended its stance on Binance.com (幣安) and FTX, following criticisms about the differing treatment of the two firms since the regulator had previously alerted the public to Binance.com.
The “clear difference” between the two was that Binance.com was “actively soliciting” users in the city-state, to the extent of offering listing in Singapore dollars among other incentives, while FTX was not, the agency said in a statement yesterday.
In response to “questions and misconceptions” that it was possible to protect local users who dealt with FTX, such as by ringfencing their assets or ensuring that FTX backed its assets with reserves, the MAS reiterated that FTX is not licensed in the country and again warned about the dangers of dealing with unregulated entities.
“The most important lesson from the FTX debacle is that dealing in any cryptocurrency, on any platform, is hazardous,” it said. “There is no protection for customers who deal in cryptocurrencies. They can lose all their money.”
Cryptocurrency prices struggled yesterday amid the ongoing crisis sparked by the downfall of Sam Bankman-Fried’s once-powerful FTX empire. The largest token bitcoin fell 0.9 percent to US$16,110.71, while second-ranked ether fell 1.1 percent to US$1,128.49.
Additional reporting by Bloomberg
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