A Bank of England (BoE) official has warned that the growth of the crypto asset market could cause a global financial crisis similar to the crash in 2008 unless regulations are introduced.
The BoE deputy governor for financial stability Jon Cunliffe likened the growth of crypto asset space to the $1.2 trillion subprime mortgage market of 2008.
The crypto space has soared in value in recent years, being worth $16 billion five years ago to $2.3 trillion in today’s market.
“When something in the financial system is growing very fast, and growing in largely unregulated space, financial stability authorities have to sit up and take notice,” Cunliffe said.
While Cunliffe recommended to err on the side of caution when it came to cryptocurrencies, he also acknowledged that regulatory bodies and governments should be careful to not to overreact or see new approaches as “dangerous” just because they are different.
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Cunliffe also pointed out that crypto techonolgy can offer the prospect of “radical improvements” in financial services.
Retailers are taking increasing interest in the space, with large brands including Louis Vuitton releasing Non-fungible Token (NFT) collections recently.
While banks are exploring the prospects of stablecoins, which are essentially regulated cryptocurrencies that are backed by fiat currency, the volatility of the market is one of the main barriers to widespread adoption.