Highly-speculative cryptoassets like bitcoin are becoming more interlinked with big investors, but they don’t pose a threat that requires action beyond monitoring for now, the Bank of England (BoE) said on Tuesday.
LONDON: Highly-speculative cryptoassets like bitcoin are becoming more interlinked with big investors, but they don’t pose a threat that requires action beyond monitoring for now, the Bank of England (BoE) said on Tuesday.
Price volatility in certain cryptoassets could highlight “potential pockets of exuberance”, the BoE said in its twice-yearly Financial Stability Report (FSR).
Cryptoassets are still largely held by retail investors, with more systemically important institutional investors having limited exposure at present, it added.
BoE Governor Andrew Bailey repeated his warning that investors should be very clear they can lose all their money given that cryptoassets have “no intrinsic value”.
There are signs of growing interest in cryptoassets and related services from institutional investors, banks, and key payment system operators, which could increase the interlinkages between cryptoassets and other systemic financial markets and institutions, the FSR said.
“From an institutional point of view, the evidence does not point to it being a large part of the picture, but we clearly have to watch it very carefully, as we do, because it is a fast changing landscape,” Bailey said.
“Highly speculative” cryptoassets were being watched quite carefully to see if action is needed to protect retail investors, BoE Deputy Governor Jon Cunliffe said.
“From a financial stability point of view, the point at which you act is the point where you think, well actually you have a risk that is beginning to crystalise,” Cunliffe said, adding that such a moment had not been reached.
Last month Britain’s Financial Conduct Authority said Binance, one of the world’s largest cryptocurrency exchanges, cannot conduct any regulated activity in Britain.
(Reporting by Huw Jones; Editing by Mark Potter)