The deputy governor of the Bank of England, Jon Cunliffe, stated that crypto regulations should be designed on the “same risk, same regulation” principle.
Jon Cunliffe gave a speech on July 12 where he talked about some of the key lessons from the crypto winter. He stressed the importance of accelerating a regulatory framework for crypto.
Cunliffe spoke about the recent events in the crypto world. With crypto prices tumbling and crypto firms destabilized, the crypto bear market has proved difficult for many. He added that while crypto helps improve finances, proper regulation should be put in place to minimize the risks associated with it.
“Crypto technologies offer prospects for substantive innovation and improvement in finance. But to be successful and sustainable, innovation must happen within a framework that manages risks: people don’t fly in unsafe planes for long,” said Jon Cunliffe.
Cunliffe stated that most crypto assets have no intrinsic value
Cunliffe used the example of recent months to highlight various cryptocurrencies and their lack of intrinsic value. He added that these cryptocurrencies are highly volatile and can go unpredictably in all directions.
he discussed bitcoin, claiming that while the currency claims to be a hedge against inflation, it is a speculative and risky asset. Cunliffe also talked about the fall of the algorithmic stablecoin Terra and how it put pressure on the entire market.
Cunliffe also highlighted the dangers of using leverage in crypto trading. He stated that the losses can multiply enormously, especially when the forecasts go against those of the investors.
He also stressed the importance of swiftly introducing a regulatory framework. Cunliffe stated that digital assets have not yet reached a position that they pose a systemic risk.
“Or to put it the other way around, the lesson we shouldn’t learn from this episode is that ‘crypto’ is somehow ‘over’ and we don’t have to worry about it anymore.”
Jon Cunliffe
Cunliffe also stressed that the underlying technology of digital assets will be developed even in the traditional financial system. He also stated that the regulations should follow the principle of “same risk, same regulatory outcome”. This means that regulators need to spread the already existing financial regulations to minimize the similar risks of crypto.