BoE looks to tighten crypto rules

The Bank of England will step up talks next year with its international counterparts on a regulatory regime for fast-growing crypto assets.

Sarah Breeden, executive director for financial strategy and risk at the Bank, said that moves by banks to offer cryptocurrency trading and custody services to clients meant that global regulators needed to design rules to protect the financial system.

Crypto investments take three primary forms: currencies such as bitcoin, which are not backed by any assets; so-called stable-coins, which aim to hold a store of value more like a means of payment; and decentralised finance, whereby a loan agreed between individuals could take the form of a string of computer code.

“The closer those assets get to the core of the financial system, the more likely those knock-on effects are likely to be material.” While this is just 1 per cent of all global assets, the vast majority of those assets are in “unbacked” items such as bitcoin, which have no underlying assets supporting them.

“We don’t have a regulatory framework that’s fit for crypto-coins yet, but what we are doing is rolling our sleeves up and getting ready to build it,” Breeden said.

“The ability to get data on what institutional investors are [holding] is a challenge,” she said.

While the Bank has said the risk posed to the financial system by the cryptocurrency market is limited at present, it wants to know more about the sector’s growth.

The Bank of England faced “challenges” in finding data on cryptocurrency holdings by institutional investors.

This was work, Breeden said, the Financial Stability Board would discuss that — a body that unites central banks globally, including in Japan, America, Europe and Australia.

The market value of crypto assets has increased tenfold since 2020 to around $2.6 trillion.

The Treasury has already proposed that the Bank regulate stable coins, but this system does not yet exist.

Some 2.3 million Britons own crypto investments, but their holdings are typically small.

Summarised www.sba.tax

Comments

Cloud Bookkeeping

US FED rate rise.

The US Federal Reserve officials have indicated that they plan to resume increasing interest rates to control inflation in the world's biggest economy. During the June meeting, the Federal Open Market Committee reached a consensus to keep interest rates stable for the time being to evaluate whether further tightening of policy would be necessary. However, the majority of the committee anticipates that additional rate increases will be required in the future. The minutes of the meeting have recently been made public. According to the minutes, most participants believed maintaining the federal funds rate at 5 to 5.25 per cent was appropriate or acceptable, despite some individuals wanting to raise the acceleration due to slow progress in cooling inflation. Although Fed forecasts predicted a mild recession starting later in the year, policymakers faced challenges in interpreting data that showed a tight job market and only slight improvements in inflation. Additionally, officials gr...

EU business slide.

S&P Global’s flash eurozone composite purchasing managers’ index, a key gauge of business conditions for the manufacturing and services sector, fell 1 point to 47.1, figures showed yesterday. That is its lowest level since November 2020 and the fourth consecutive month below the crucial 50 mark separating growth from contraction. One of the few bright spots in the survey was that companies in all sectors reported a slight easing of cost pressures, price growth and supply chain constraints. However, prices charged for goods and services still rose at the sixth fastest rate since such data started in 2002. Jobs growth increased marginally from October but remained low compared with the past 18 months. Following a few months of falling price pressure in manufacturing and services, the October print shows an overall stabilisation said Jens Eisenschmidt, chief European economist at Morgan Stanley. However, German businesses, at the hub of Europe’s energy crisis, reported that manu...

Tariffs on UK electric cars.

The European Commission has confirmed that it will continue with its plan to impose tariffs on electric cars exported between the UK and EU starting next year. This is due to the "rules of origin" requirement that mandates EVs traded across the English Channel to have 60% of their battery and 45% of their parts sourced from the EU or UK or face a 10% tariff. A senior Commission official, Richard Szostak, recently informed parliamentarians from the UK and EU that the bloc's battery investment has significantly declined, making the tariffs necessary to encourage domestic production. In 2022, the EU's share of global investment in battery production shrank from 41% to only 2% after the US offered substantial subsidies through its Inflation Reduction Act. Starting in 2024, car manufacturers in the UK will need to have 22% of their sales come from zero-emission vehicles, which means they may need to import EVs from the continent to meet this requirement. If EU carmakers ...

Search This Blog