The Bank of England (BOE) explained the need for stricter law imposition and regulation for the crypto industry amid a $2 trillion reduction in the total market capitalization of crypto assets. As per Bloomberg, The Financial Policy Committee of the BOE said on Tuesday that crypto prices have been extremely volatile in recent months.
The current market capitalization of the total crypto on the market stands at $1 trillion. It rose to more than $3 trillion in November when it touched its peak.
The general manager of the Bank of International Settlements (BIS), Agustin Carstens, claimed that all the weaknesses in the crypto market “that were pointed out before have pretty much materialized,” which includes rolling back their leveraged positions and liquidity mismatches.
The BOE expects the market to fall even below its current levels. Because of this sudden continuous downtrend, the bank wants stringent regulations to be imposed on the sector.
“This underscores the need for enhanced regulatory and law enforcement frameworks to address developments in these markets.”
Christine Lagarde, the president of the European Central Bank likewise said: “Crypto assets and decentralized finance (defi) have the potential to pose real risks to financial stability.”
However, the bank thinks that the current volatility in the crypto market isn’t a gamble to the steadiness of the UK‘s financial stability, the central bank advised that fundamental dangers would arise if the crypto movement and its correlation with the conventional financial system keep on developing.
Sir Jon Cunliffe, Bank of England’s deputy governor for financial stability has said on occasions that the cryptocurrency market could represent a danger except if earnestly regulated. He cautioned in May of tough situations ahead for cryptocurrency investors as the Federal Reserve and other central banks tighten monetary policy. In December last year, he said that crypto prices could tumble to absolutely nothing.
Andrew Bailey, the governor of the Bank of England, said in June that investors ought to be ready to lose all their cash while investing in crypto. He says that cryptocurrencies don’t have inherent worth and bitcoin is certainly not a useful mode of payment.