Greece
Calamos Supports GreeceCalamos Supports Greece
GreekReporter.com Business Bitcoin Could Bring Another Financial Crisis, Bank of England Warns

Bitcoin Could Bring Another Financial Crisis, Bank of England Warns

bitcoin ponzi scheme
A deputy at the Bank of England has warned that Bitcoin could lead to another financial collapse. Credit: Onov3065, CC BY-SA 4.0

A senior deputy at the Bank of England cautioned on Wednesday that the cryptocurrency Bitcoin could lead to another financial crisis.

Deputy governor Sir Jon Cunliffe said that governments must begin to instill stricter regulations on crypto, comparing the volatility of digital currencies to the US sub-prime mortgage bubble that ended in disaster with the 2088 recession. Cunliffe warns that crypto could crash dramatically in the coming years, triggering a devastating reverberation similar to that of the housing markets over a decade ago.

Bitcoin and Ethereum, the two largest digital currencies on the market, experience a rough spot at the beginning of this year but have since pumped in value, with many speculating that they may reach all-time highs in value. Bitcoin was worth merely $700 dollars per coin five years ago. It’s now worth $56,000.

Cunliffe has been keeping close tabs on this growth, serving as an adviser to the G20’s financial stability board as well as working with the Bank of International Settlement’s advisory body.

Bank of England deputy compares crypto market to 2008 housing market crash

The growth in cryptocurrencies during 2021 has been astounding, with digital currency growing roughly 200% in value from $800 billion to $2.3 trillion.

But Cunliffe warns that aspects of this growth resemble that of the sub-prime mortgages and that there are already signs that indicate that crypto traders are investing in crypto with borrowed money. If crypto crashes, these lenders could be affected, leading to a wider collapse in the financial system.

“Of course $2.3tn needs to be seen in the context of the $250tn global financial system. But as the financial crisis showed us, you don’t have to account for a large proportion of the financial sector to trigger financial stability problems – sub-prime was valued at about $1.2tn in 2008,” he said.

“The bulk of these assets have no intrinsic value and are vulnerable to major price corrections. The crypto world is beginning to connect to the traditional financial system and we are seeing the emergence of leveraged players. And, crucially, this is happening in largely unregulated space,” Cunliffe said.

“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,” he added.

Cunliffe says that one of the main impasses with crypto and the rest of the financial sector is the “painstaking, careful process” required to create the necessary systems for regulating crypto and the fast-paced expansion of digital trading.

 

See all the latest news from Greece and the world at Greekreporter.com. Contact our newsroom to report an update or send your story, photos and videos. Follow GR on Google News and subscribe here to our daily email!




Related Posts