UK Central Bank Continues to Warn Investors of Risks as Lobby Group Pushes for Further Regulation

Despite recent commercial banks coming forward in support of cryptocurrency, the Bank of England continues to warn investors of its risks.

Stay Away, They Say

The Bank of England continues to warn investors against the use of bitcoin and other cryptocurrencies. Andrew Bailey, the bank’s Governor, told a House of Commons Treasury Committee the following:

“I’m skeptical about crypto assets, frankly, because they’re dangerous, and there’s a huge enthusiasm out there.”

The statement illustrates a clear divide in the attitudes and approach of commercial banks and central authority banks, as the popularity of cryptocurrency grows among the population. While investment banks such as Wells Fargo and Goldman Sachs have recently performed a U-turn on cryptocurrency, offering them to clients as an investment opportunity, central banks such the Bank of England are becoming increasingly vocal in their naysaying. 

OK, Bailey

Governor Bailey is no stranger to crypto skepticism. In October last year he claimed that bitcoin had no intrinsic value, although he also added that it may have some extrinsic value since people want it, and in a speech to the Brookings Institution he said that cryptos “have no connection at all to money.”

For that reason, Bailey’s assertion that cryptos are “dangerous” is nothing particularly new from him. At a previous parliamentary session Bailey told MPs, “If you want to invest in Bitcoin, be prepared to lose all your money.”

Bailey’s position on crypto contrasts sharply with his view of stablecoins for which he can see a use-case. While criticizing bitcoin and other cryptos he also said:

“Stablecoins could offer some useful benefits. For example, they could further reduce frictions in payments, by potentially increasing the speed and lowering the cost of payments.”

As we reported earlier this month, the Bank of England is moving forwards with plans for its own CBDC. Although still at an early stage, a task force has been set up to examine whether the UK should proceed. A statement from the bank said:

“The Government and the Bank of England have not yet made a decision on whether to introduce a CBDC in the UK, and will engage widely with stakeholders on the benefits, risks and practicalities of doing so.”

It will be interesting to see whether the Bank of England does move beyond the planning stages and actively implements its CBDC. Should such a day arrive, a continued opposition to cryptocurrency could be viewed as one rule for the bank, and another for everyone else.

Regulate For Wealth

While Bailey spreads more FUD on crypto, an industry lobby group in the UK has been pushing for greater regulation in the sector. TheCityUK, which was founded to represent the interests of the British finance industry, wants to ensure that only regulated companies with proper authorization are allowed to offer cryptocurrencies to retail investors.

“Government and regulators have an important part to play,” Miles Celic, Chief Executive Officer of TheCityUK, said in a statement, as well as stating the following:

 “They must set safe and robust rules for this burgeoning sector — while ensuring they don’t inadvertently squash good ideas before they can mature and flourish.”

As explained by TheCityUK, the group sees regulation as the best means of protecting retail investors. At the same time however, the group is clear on the financial opportunities that regulation can provide. They group adds:

 “Clarity on the regulation of cryptoassets and related services such as issuance, trading and safekeeping will determine firms’ appetites to use the UK to launch innovative products and services.”

Final Thoughts

The position of the Bank of England’s Governor seems intractable, but at the same time, the commercial banking sector which has also once held great skepticism regarding blockchain, is warming significantly to bitcoin and other cryptos as an investment opportunity. Central banks such as The Bank of England might wish to stop the growth of bitcoin and its peers, but the view from TheCityUK and the traditional financial institutions which it represents, is that it should be controlled and exploited through greater regulation.

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