An exec at the Bank of England (BoE) has sounded a note of warning about the growth of cryptocurrency. According to the bank’s deputy governor for financial stability Jon Cunliffe, the growth and widespread use of cryptocurrency will significantly and negatively affect credit supply from traditional banks.
Cunliffe spoke at the London School of Economics about digital currencies, including stablecoins and central bank digital currencies (CBDCs). Speaking specifically about stablecoins, he says that increased issuance and supply of stablecoins might dent the credit system. He also said that with the integration of many platforms, such as crypto with social media, the risk of this happening is a lot higher.
“In such a world, and depending how and whether stablecoins were backed with other financial assets, the supply of credit to the real economy through the banking system could become weaker or indeed disappear. That would be a change with profound economic consequences.”
Cunliffe also addressed financial regulators about the upcoming changes, asking them to brace themselves. According to him, authorities should find a way to handle such an ecosystem way before it comes.
His speech suggests he believes that a future like that is inevitable because of the advantages of stablecoins including much cheaper cross-border transactions as well as financial inclusion.
Just last week, the BoE’s chief cashier says that the world’s central banks need to start throwing their weight behind cryptocurrencies before it’s too late.
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