Bank of England warns of "side effects" of cryptocurrencies in traditional markets
Bank of England warns of "side effects" of cryptocurrencies in traditional markets By Editor DiarioBitcoin

BOE

says growing interest in cryptoassets by institutional investors, banks and payments operators is a concern.

***

The Bank of England (BOE) warned about the threat of “spillover effects”

from cryptocurrencies (which it prefers to call cryptoassets) on conventional financial markets in its latest biannual Financial Stability Report.

In the report presented to Parliament and published today, this central bank noted bearish conditions in the crypto market since May that have seen the price of Bitcoin

fall by around 50%.

Although the “spillover effects to broader financial markets”

from cryptocurrencies are limited, the BOE said the growing interest in cryptoassets by institutional investors, banks and payments operators is a concern.

“These developments could increase interconnections between cryptoassets and other systemic financial institutions and markets,”

the report said.

Exposure to cryptocurrencies among financial institutions has previously been highlighted as a threat, with the Basel Committee of the Bank for International Settlements suggesting last month that banks should set aside capital to cover losses in full

.

The BOE’

s text

We translate verbatim some of what the Bank of England says in its report

:

“Increased risk-taking has also manifested itself in the price volatility of certain cryptoassets.

‘Alongside these indicators, the rapid appreciation in cryptoasset valuations and recent high levels of price volatility in these instruments could highlight potential pockets of exuberance. Prices of major cryptoassets such as Bitcoin and Ethereum experienced strong appreciation during the 12 months to April 2021. In particular, Bitcoin’ s price increased six-fold during that period. But then it sold off sharply in May, so that its price fell by about 50% and has remained at this lower level, and remains particularly volatile, with downward-skewed price movements in June 2021. The effects of this episode on broader financial markets were limited.”

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“Market intelligence suggests that cryptoassets are held by retail investors, and institutional investors have limited exposure at present. However, there are some signs of growing interest in cryptoassets and related services from institutional investors, banks and key payment system operators. These developments could increase interconnections between cryptoassets and other systemic financial institutions and markets.”

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