Bitcoin and cryptocurrency prices have soared this week, propelling the combined crypto market to its all-time high of around $ 2.5 trillion.
Bitcoin’s price is up 50% from its September lows, rising to more than $ 60,000 per bitcoin for the first time since May as Wall Street giants continue to offer their customers more bitcoin and crypto services, including a highly anticipated Bitcoin Futures Exchange Traded Fund (ETF). .
Earlier this week, influential central banker Jon Cunliffe, currently Bank of England Deputy Governor for Financial Stability, warned of a “massive collapse in crypto prices [is a] plausible scenario” and the rapid growth of the Bitcoin and cryptocurrency market could pose a threat to the financial system if it is not urgently regulated.
You don’t have to consider a large part of the financial sector to cause problems with financial stability, said Jon Cunliffe in a speech, noting that the cyber market will grow by about 200% from just under $ 800″ billion to 2.3 in 2021 Trillion dollars today.
As the [global] financial crisis of 2008 showed us, it is not necessary to look at a large portion of the financial sector to create problems of financial stability; Subprime mortgages were valued at around $ 1.2 trillion in 2008.
Bitcoin price has risen sharply in recent years, but is still very volatile, after Bitcoin price rose to almost $ 65,000 in May per bitcoin had risen, the market went into free fall and the bitcoin price lost almost half of its value in a matter of days.
Cunliffe mentioned the expansion of large banks into crypto services, the growth of crypto hedge funds and payment companies, which allow people to transact in stablecoins (cryptocurrencies tied to traditional currencies) as an indication of the increased risk.
Cunliffe, who has played a key role in overseeing cryptocurrencies in recent years as advisor to the G20 Financial Stability Board and the Geneva Bank for International Settlements, urged regulators to urgently contain the red hot market with tough regulations.
When something is growing very quickly in the financial system and growing in a largely unregulated space, the financial stability authorities need to sit down and take notice, said Cunliffe, adding, Regulators at the international level and in many jurisdictions have started working. It needs to be done urgently.
This week, Coinbase, the San Francisco-based cryptocurrency and bitcoin exchange, called for the creation of a single dedicated body to regulate the cryptocurrency market, arguing that existing regulators are too fragmented and U.S. securities law is out of date. Gary Gensler, President of the USA Legislators have hired the Securities and Exchange Commission (SEC) to address their concerns about the cryptocurrency market.
Coinbase and Binance, the world’s largest crypto exchange by volume that currently has no permanent headquarters, have clashed with regulators around the world this year as watchdogs struggle to oversee the new digital asset class that transcends many traditional systems.
Many bitcoin and cryptocurrency companies are demanding regulatory clarity which they believe will help bring new funds and innovation into the burgeoning crypto space.
We welcome more regulation in this area as it will attract more capital and interest, and it is already happening, said Martha Reyes, director of research at Bequant Digital Asset Brokerage and Exchange, in commentary via email. However, it is an exaggeration to say that the sector is a threat to financial stability.
Cunliffe isn’t the first to warn that the wildly hot crypto and bitcoin market could lead to a future collapse. Earlier this year, Viktor Shvets, managing director at Macquarie, told the Odd Lots podcast that the next financial crisis could stem from cryptocurrency mania.
