The Bank of England deputy warns that a cryptocurrency crash could lead to the next market crash
Bitcoin and other cryptocurrencies may cause the next financial meltdown, according to a senior Bank of England official.
In a speech yesterday, Deputy Governor Sir John Cunliffe said a massive crash in cryptocurrency prices to zero is “certainly a reasonable scenario” and that there is a “potential for contagion” across the global financial sector.
Cunliffe said the blow to retail investors in the event of a crypto crash is unlikely to cause a ‘financial stability risk’. But, he added, “the picture is less clear for financial institutions.”
Volatile: Bank of England Deputy Governor Sir John Cunliffe says a massive crash in cryptocurrency prices to zero is “certainly a plausible scenario.”
Compare the potential crash of cryptocurrency with other financial crashes, and highlight that the cryptocurrency market is now worth £1.7 trillion, larger than the sub-prime market in 2008 when it collapsed.
“As the financial crisis has shown us, you don’t have to account for a large proportion of the financial sector to raise financial stability problems.”
Cunliffe said crypto regulation “needs to follow up as a matter of urgency.”
“When something in the financial system is growing too fast, in a largely unregulated space, the financial stability authorities have to take notice.”
The value of the cryptocurrency market has increased by 200 percent this year.
The comments came after the bank canceled private meetings with banks and financial institutions.
A source said the decision followed a meeting between a bank official and a major US investment bank supposedly under Chatham House rules.
But as a result, it is understood that policy information was disclosed.