BOE's Cunliffe Says Regulation Can Save Crypto From Itself and It's Worth It

Blockchain technologies can bring improvements to finance, given a regulatory framework, and links between DeFi and TradFi are already rapidly cemented, Cunliffe said.< /p> New

Bank of England Deputy Governor Jon Cunliffe shared his thoughts on cryptocurrency regulation and decentralized finance (DeFi) at a conference on November 21. He intended to speak about stablecoins and central bank digital currency (CBDC), Cunliffe said at a conference in Coventry, but the collapse of FTX as he wrote his draft speech l also led to some more general observations.

FTX and a number of other centralized crypto-asset exchanges “appear to operate like conglomerates, combining products and functions within a single company” without the tight controls of traditional finance, Cunliffe said . There is "tentative and limited evidence" that the failure of FTX has spurred transfers to decentralized platforms, although there is little comfort:

“It is unclear to what extent these platforms are truly decentralized. Behind these protocols are usually companies and stakeholders who derive revenue from their operations. practice, controls protocol governance."

Regulation is necessary to protect consumers, protect financial stability and encourage innovation, Cunliffe said, and:

“While the crypto world, as demonstrated during last year's crypto winter and last week's FTX implosion, is currently not big enough or sufficiently interconnected with traditional finance to threaten the stability of the financial system, its links with traditional finance have been growing rapidly.”

The Bank of England, Financial Conduct Authority and HM Treasury are setting up a regulatory sandbox to refine "technologies that have been pioneered and refined in the world of crypto, such as tokenization, encryption , distribution, atomic settlement and smart contracts" that provide benefits to the financial system.

The @bankofeng...