The Bank of England, Financial Policy Committee (FPC), is out with their statement from the meeting on March 12th regarding the outlook for UK financial stability risks. Included within the statement is a comment on crypto-assets.
The Bank states:
The Committee recognises the potential benefits of the technologies underlying crypto-assets and of their potential to create a more distributed and diverse payments system. It welcomes the work of the Bank and other authorities to explore ways of achieving these benefits in a robust and efficient manner.
The FPC judges that existing crypto-assets do not currently pose a material risk to UK financial stability – as set out in Annex 2. The FPC will act to ensure the core of the UK financial system remains resilient if linkages between crypto-assets and systemically important financial institutions or markets were to grow significantly. In the event that one or more crypto-assets were likely to become widely used for payments, or as an asset intended to store value, the FPC would require current financial stability standards to be applied to relevant payments and exchanges.
Within the Annex (embedded below), the Bank addresses several points, specifically;
- The Committee recognises the potential benefits of the technologies underlying crypto-assets and of their potential to create a more distributed and diverse payments system.
- The FPC judges that existing crypto-assets do not currently pose a material risk to UK financial stability.
- The FPC will aim to ensure the core of the UK financial system remains protected if linkages between crypto-assets and systemically important financial institutions or markets were to grow significantly.
- In the event that one or more crypto-assets were likely to become widely used for payments, or as an asset intended to store value, the FPC would require current financial stability standards to be applied to relevant payments and exchanges.
- Crypto-assets also raise a number of other public policy concerns, many outside the purview of the Committee.
The comments should not come as a surprise due to the relatively small size of the crypt-asset marketplace. If the use of cryptocurrencies would increase substantially, the FPC says risks could arise that could pose a risk to the financial system. The FPC welcomes the upcoming discussion on cryptocurrencies at the Financial Stability Board and the G20.