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BoE warns for crypto.

 Crypto exchanges such as the bankrupt FTX that bundle together services kept separate by mainstream institutions should be more tightly regulated before they become a risk to the financial system, a senior Bank of England official has warned.

Digital asset exchanges created risks to their markets by operating businesses that encompassed trading, lending, clearing and custody of client assets, Sir Jon Cunliffe, deputy governor, said yesterday. However, he noted that traditional markets maintain careful separation between these different roles to guard against risks.

«But part is also because the crypto institutions at the centre of much of the system exist in largely unregulated space and are very prone to the risks that regulation in the conventional financial sector is designed to avoid».

The sudden failure of FTX, considered until recently one of the most responsible crypto venues, has heaped pressure on other exchanges. For example, Changpeng Zhao, Binance's chief executive, has warned FTX's collapse will increase regulatory scrutiny of its surviving peers.

«A firm accepting its unbacked crypto asset as collateral for loans and margin payments, as there are indications may have happened with FTX, creates extreme 'wrong way' risk,» said Cunliffe.

He restated the BoE's position that crypto markets do not yet have the scale or close links to traditional markets to threaten more comprehensive financial stability but said regulators needed to protect consumers.

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  1. Anonymous22 November 2022 at 12:31

    Can't understand how FTX was considered one of the more responsible crypto venues. I hear all sorts of crazy stories about how things were handled there and it makes me wonder. Are we this easily duped? Why wasn't anyone checking on these guys?

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