Crypto needs regulation — technology can't remove all financial risks, BOE's Cunliffe says

cnbc.com:

Regulators need to «get on with the job» of bringing the use of crypto technologies within the «regulatory perimeter,» says Jon Cunliffe, Bank of England's deputy governor for financial stability.

Speaking at the British High Commissioner's residence in Singapore on Tuesday, Cunliffe shared insights on the recent "crypto winter," which refers to a period of falling crypto prices that remain low for an long time.

Finance carries inherent risks, and while technology can change the way risks are managed and distributed, it cannot eliminate them, he added.

«Financial assets with no intrinsic value … are only worth what the next buyer will pay. They are therefore inherently volatile, very vulnerable to sentiment and prone to collapse,» said Cunliffe.

Bitcoin has fallen more than 70% from its record high hit in November and was trading below $20,000 on Wednesday, its lowest level since December 2020, according to CoinDesk data.

As investors dumped crypto amid a broader sell-off in risk assets, the market cap of crypto fell below $1 trillion, down from $3 trillion at its peak in November.

Cryptocurrencies may not be «integrated enough» into the rest of the financial system to be an «immediate systemic risk,» Cunliffe said, but he said he suspects the boundaries between the crypto world and the traditional financial system will «increasingly become blurred.»

«The interesting question for regulators is not what will happen next to the value of crypto assets, but what do we need to do to ensure that… prospective innovation … can happen without giving rise to increasing and potentially systemic risks.»

Regulators have increasingly been sounding the alarm about crypto, and Cunliffe said the extension of aregulatory framework to