The Bank of England acknowledged that cryptocurrencies are not a concern and that no additional action is required other than monitoring.
There are evidence of increased crypto interest from major payment system operators and banks, according to the FSR research.
Tax evasion, terrorist financing, and money laundering have all been linked to Bitcoin for a long time. As a result, officials have sought for strong regulations to govern its use. Due of their varied worries, some have even called for a total ban on digital assets. The Bank of England, on the other hand, has stated that crypto poses insufficient hazards to warrant intervention beyond existing surveillance. Regardless, the bank acknowledged in its Financial Stability Report (FSR) that: Price volatility in certain crypto assets poses a risk of highlighting potential pockets of enthusiasm.
The research goes on to say that the crypto market is primarily made up of retail investors, with institutional investors becoming more involved as time goes on. The FSR acknowledges that bitcoin uptake has been particularly outstanding this year. According to the FSR, there are indicators of increased crypto interest from major payment system operators and banks, with the goal of improving interconnections between traditional financial institutions and cryptos.
Andrew Bailey, governor of the Bank of England, reiterated his opinion that cryptocurrency has no inherent value and warned investors that they risk losing their whole investment.
The evidence does not indicate to it being a significant part of the picture from an institutional standpoint, but we must keep a close eye on it since it is a rapidly changing landscape.
Inflation in the United Kingdom is expected to encourage institutional cryptocurrency investment.
Despite reports that the Bank of England will take no action beyond monitoring crypto-assets, deputy governor Jon Cunliffe stated that the bank is closely monitoring the market for any potential actions to protect regular investors.
From the standpoint of financial stability, the point at which you act is when you realize that you have a danger that is beginning to materialize.
It was recently stated that young persons in the United Kingdom aged 18 to 35 had made significant investments in Bitcoin. Intriguingly, rising inflation in the United Kingdom may compel many other institutional investors to utilize Bitcoin as an inflation hedge.
In 2020, more Britons will buy cryptocurrency than stocks, according to a report.
According to a recent announcement by ONS deputy national statistician Jonathan Athow, inflation has risen for four months in a row, reaching its highest level in three years. Inflation rose to 3% this year before falling below the 2% objective.
Paul Dales, the chief UK economist at Capital Economics, has warned that inflation could reach 4% by the end of the year.
We believe that the current increase in inflation is only temporary, thus the Bank of England will not respond by tightening policy.
This might fuel demand for Bitcoin and other high-performing cryptocurrencies, particularly among institutional investors.
The Bank of England is the central bank of the United Kingdom. Bitcoin and Cryptocurrency Regulation/n
