The United Kingdom has been more open-minded to digital currency innovations than the United States as the terms of market engagement governing startups are relatively clearer.
The current growth of the global digital currency industry which led to a $2.3 trillion market capitalization has been noted by the Financial Policy Committee (FPC) of the Bank of England (BoE). According to a Friday publication detailing the outlook of the Financial Ecosystem in the UK, the FPC said it is not oblivion of the growth in crypto assets and their potential impact on the global economy.
While the FPC noted that at present, digital currencies do not pose any immediate threat to the UK, the policymakers said active steps must be created to guard against any future threats these cryptocurrencies can usher in.
“Cryptoasset and associated markets and services continue to grow and to develop rapidly. Such assets are becoming increasingly integrated into the financial system,” the FPC noted, adding that “The FPC judges that direct risks to the stability of the UK financial system from cryptoassets are currently limited. However, regulatory and law enforcement frameworks, both domestically and at a global level, need to keep pace with developments in these fast-growing markets in order to manage risks and to maintain broader trust and integrity in the financial system.”
According to the FPC, continuous monitoring of the growth of the digital currency ecosystems will continue, especially as it relates to the UK economy.
“The FPC will continue to pay close attention to developments, including the relationship between crypto assets and the UK financial system, and thereby seek to ensure resilience to systemic risks that may arise from further developments in crypto asset markets,” the publication details with the FPC ending its take on digital currencies with a piece of advice “that financial institutions should take a cautious and prudent approach to any adoption of these assets.”
Crypto Assets and UK Regulators
The United Kingdom has been more open-minded to digital currency innovations than the United States as the terms of market engagement governing startups are relatively clearer. However, UK regulators, particularly the Financial Conduct Authority (FCA) have often issued notes of warning detailing the risks inherent in investing in speculative cryptocurrencies.
In its latest efforts to protect consumers, the UK FCA has banned derivatives products, a move that has forced trading platforms to reduce the leverages on their margin trading considerably. The FCA has also taken a hard stance on certain digital currency trading platforms, with Binance, the world’s largest exchange by trading volume amongst those caught up in the current shakedown.
Besides UK regulators, market watchdogs in Singapore, Malaysia, South Africa, and Hong Kong amongst others have also taken a harsh stance with Binance in recent times, citing the trading platform’s illegal operational activities within their region.
In general, many federal governments around the world are responding to the surge in the adoption of cryptocurrencies by engaging in the development of their own Central Bank Digital Currencies (CBDCs). The Bank of England has also unveiled its plans to research the possibilities of floating its own Digital Pound through the establishment of a CBDC task force as announced back in April.
Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.
