Tightening ties between traditional finance and cryptocurrency markets mean that regulators around the world can't stop talking crypto.
On October 13, Jon Cunliffe, deputy governor of financial stability at the Bank of England, spoke on the risks crypto poses to the financial system, particularly in stablecoins, decentralized finance and derivatives trading on unbacked digital assets.
While Cunliffe repeatedly noted that cryptocurrency markets remain quite small, he highlighted that the risks they pose hinge upon "the degree of interconnectedness between crypto and the conventional financial sector." That degree of interconnectedness has been growing.
Cunliffe found regulation's pace to be lacking, especially relative to the rate of the industry's developments. Speeding up regulation, he said, "needs to be pursued as a matter of urgency."
"Financial stability risks currently are relatively limited but they could grow very rapidly if, as I expect, this area continues to develop and expand at pace. How large those risks could grow will depend in no small part on the nature and on the speed of the response by regulatory and supervisory authorities."
The Bank of England has been engaged with crypto regulation for some time, especially in its capacity as a monetary authority and ongoing work on a digital pound. Alongside HM Treasury's Katharine Braddick, Cunliffe leads a recently established joint task force of the two UK regulators, focusing on digital currency.