Breaking News: Crypto Needs Regulation

According to Jon Cunliffe, the Bank of England’s deputy governor for financial stability, regulators must “get on with the task” of bringing the usage of crypto technologies within the “regulatory perimeter.”

Cunliffe spoke at the British High Commissioner’s house in Singapore on Tuesday, sharing observations on the recent “crypto winter,” which refers to a period of dropping cryptocurrency prices that remain low for an extended length of time.

Finance is fraught with dangers, and technology can alter how risks are managed and distributed.

Bitcoin has dropped more than 70% from its record high in November and was trading below $20,000 on Wednesday, its lowest level since December 2020.

As investors sold crypto as part of a broader sell-off in risk assets, the market cap of cryptocurrency plummeted below $1 trillion, down from $3 trillion at its peak in November.

Regulators are growing concerned about cryptocurrency, and Cunliffe believes that expanding a regulatory framework to include crypto “must be anchored on the iron premise same risk, same regulatory outcome.” Stablecoins are a sort of cryptocurrency that is designed to track another currency in the real world. Many of them try to link themselves to the US dollar or another fiat currency. Some are backed by real-world assets like bonds or currencies.

They were created to provide a reliable store of value to reduce price fluctuation. The demise of terraUSD (UST), a so-called “algorithmic” stablecoin linked to the US dollar, sent shockwaves through cryptocurrency markets. TerraUSD, unlike other stablecoins, was not backed by real assets. Instead, it was managed by an algorithm that aimed to tie it to the US dollar one-to-one.

Luna, its sibling token with a floating price and intended to act as a type of shock absorber for UST, has similarly lost virtually all of its value.

The degrees of risk mitigation that we have determined are implicit in our regulatory standards and frameworks. Where regulation cannot be applied the same way, we must ensure the same level of risk mitigation.”

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