Bank of England official argues stablecoins could disrupt financial stability

Jon Cunliffe has cautioned that stablecoins could have negative impact on the financial system but how big of an impact is not clear.

Bank of England deputy governor Jon Cunliffe has warned that stablecoins may bring around financial instability.

According to the top-ranking banking official, stablecoins could make disruptive changes to mainstream finance and threaten financial stability.

Speaking at the Innovative Finance Global Summit held in London, Cunliffe argued that the bank has estimated how financial stability could be undermined over time by stablecoins.

However, there is no exact way to know how much damage may be caused or how rapidly this impact may unfold.

“We cannot know for certain the extent and the speed at which payment stablecoins might be adopted and we may well need limits, at least initially, to ensure we avoid disruptive change that could threaten financial stability”, Cunliffe stated.

There are numerous reasons why stablecoins may appeal to consumers and then again, why they may prove a risk with widespread consequences.

Although many consumers are reluctant to try cryptocurrencies, stablecoins borrow the same technology but pin their price to the value of a real-world currency, such as the US dollar.

One of the issues is that should a stablecoin fail, there is not really any way to reimburse consumers.

Cunliffe said that systemic stablecoins pose risks to the financial system. To this end, the British government is now working to address the possible risks stemming from digital currencies.

The Financial Services and Markets Bill already factors in several mechanisms to regulate cryptocurrencies and protect consumers.

Meanwhile, the country is also looking to create a digital version of the British pound which will more or less emulate the qualities of a stablecoin.

Yet, there is a lot to be discussed still – the privacy of people transacting money would be of great importance with no solutions at hand just yet.

Cunliffe’s remarks reflect growing concern among top-tier bankers who expect the crypto market to soon begin impacting the mainstream financial system – impacts that bankers do not fully grasp yet.

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Written by Alex


Alex is a well-rounded crypto writer who focuses on general market and legal developments. His main interest lies in how crypto gaming can become a more permanent part of the gaming landscape and how blockchain holds benefits to players they are not even aware of.

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