Bank of England officials warned that cryptocurrencies could cause the 2008 collapse

Read Time:3 Minute, 24 Second

Thursday, March 18, 2021, a passage near the Bank of England (BOE) in London, England.

Holly Adams | Bloomberg | Getty Images

Jon Cunliffe, deputy governor of the Bank of England responsible for financial stability, warned that unless strict regulations are introduced, cryptocurrencies could trigger a global financial crisis.

In a speech on Wednesday, Cunliffe compared the growth rate of the crypto asset market (from $16 billion five years ago to $2.3 trillion now) to the $1.2 trillion subprime mortgage market in 2008.

“When something in the financial system grows very fast, and grows in a largely unregulated space, the financial stability authorities must sit down and pay attention,” he said.

Cunliffe acknowledged that governments and regulators must be careful not to overreact or classify new methods as “dangerous” just because the new methods are different, and pointed out that encryption technology offers the prospect of “radical improvements” in financial services.

However, he believes that although the current financial stability risks are still limited, the current application of encrypted assets constitutes a financial stability problem, because most of them “have no intrinsic value and are susceptible to substantial price adjustments.”

Bitcoin and Ethereum, the two largest cryptocurrencies, plummeted by more than 30% earlier this year before rebounding, and have shown great volatility since their creation. Prices are susceptible to various external factors, from Tesla CEO Elon Musk’s comments to the Chinese government’s regulatory crackdown.

“The cryptocurrency world is beginning to connect with the traditional financial system, and we see the emergence of leveraged players. And, crucially, this happens in a largely unregulated field,” Cunliffe said.

His comments echoed the comments made in May by Andrew Bailey, Governor of the Bank of England, who warned that cryptocurrency investors should be prepared to lose all their funds due to the lack of “intrinsic value” of assets.

The British Financial Conduct Authority also issued a warning on the risky nature of crypto investment.

Cunliffe said that if the market continues to expand at this rate, the risks of financial stability may increase rapidly, but the scale of these risks will depend on the response speed of regulators and governments.

He pointed out that in the past five years, the price of Bitcoin has dropped by nearly 30% in a single day, the biggest of which was a drop of nearly 40% after a cyber incident in Bitcoin and cryptocurrencies in Seychelles. Exchange BitMEX.

“The forward-looking question is, if these crypto assets continue to grow on a large scale, will they continue to integrate more into the traditional financial sector, and whether investment strategies continue to become more complex, and what will be the result of these events?” Conleif said.

Cunliffe believes that whether major price adjustments can be absorbed by the system, causing some investors to suffer painful losses, but avoiding a chain reaction to the real economy, mainly depends on interconnection and leverage.

Cunliffe said that both of these appeared in the subprime mortgage market before 2008, which had a ripple effect and eventually paralyzed the global economy, and both became more prominent in the field of cryptocurrencies. He said that the ability to manage this increasing risk and ensure that the system can withstand major adjustments will depend on the authorities.

Cunliffe said: “Although encrypted finance operates in novel ways, well-designed standards and regulations can and should enable risk to be managed in the encrypted world, just like in the traditional financial world.”

Many regulators around the world have begun to work to establish a public policy framework through which to manage the exponential growth of encrypted assets, but Cunliffe stated that it must be implemented as a matter of urgency.

“Historically, technology and innovation have promoted the progress of the financial industry. Encryption technology has provided tremendous opportunities. Just as [Ralph Waldo] Emerson said: “If you make a better mousetrap, the world will pave the way for you,” he said.

“But it must be a really better mousetrap, not a mousetrap that simply lowers the standard or has no standard at all.”

0 %
0 %
0 %
0 %
0 %
0 %
We use cookies to personalise content and ads, to provide social media features and to analyse our traffic. We also share information about your use of our site with our social media, advertising and analytics partners. View more
Cookies settings
Privacy & Cookie policy
Privacy & Cookies policy
Cookie name Active

Who we are

Suggested text: Our website address is:


Suggested text: When visitors leave comments on the site we collect the data shown in the comments form, and also the visitor’s IP address and browser user agent string to help spam detection. An anonymized string created from your email address (also called a hash) may be provided to the Gravatar service to see if you are using it. The Gravatar service privacy policy is available here: After approval of your comment, your profile picture is visible to the public in the context of your comment.


Suggested text: If you upload images to the website, you should avoid uploading images with embedded location data (EXIF GPS) included. Visitors to the website can download and extract any location data from images on the website.


Suggested text: If you leave a comment on our site you may opt-in to saving your name, email address and website in cookies. These are for your convenience so that you do not have to fill in your details again when you leave another comment. These cookies will last for one year. If you visit our login page, we will set a temporary cookie to determine if your browser accepts cookies. This cookie contains no personal data and is discarded when you close your browser. When you log in, we will also set up several cookies to save your login information and your screen display choices. Login cookies last for two days, and screen options cookies last for a year. If you select "Remember Me", your login will persist for two weeks. If you log out of your account, the login cookies will be removed. If you edit or publish an article, an additional cookie will be saved in your browser. This cookie includes no personal data and simply indicates the post ID of the article you just edited. It expires after 1 day.

Embedded content from other websites

Suggested text: Articles on this site may include embedded content (e.g. videos, images, articles, etc.). Embedded content from other websites behaves in the exact same way as if the visitor has visited the other website. These websites may collect data about you, use cookies, embed additional third-party tracking, and monitor your interaction with that embedded content, including tracking your interaction with the embedded content if you have an account and are logged in to that website.

Who we share your data with

Suggested text: If you request a password reset, your IP address will be included in the reset email.

How long we retain your data

Suggested text: If you leave a comment, the comment and its metadata are retained indefinitely. This is so we can recognize and approve any follow-up comments automatically instead of holding them in a moderation queue. For users that register on our website (if any), we also store the personal information they provide in their user profile. All users can see, edit, or delete their personal information at any time (except they cannot change their username). Website administrators can also see and edit that information.

What rights you have over your data

Suggested text: If you have an account on this site, or have left comments, you can request to receive an exported file of the personal data we hold about you, including any data you have provided to us. You can also request that we erase any personal data we hold about you. This does not include any data we are obliged to keep for administrative, legal, or security purposes.

Where we send your data

Suggested text: Visitor comments may be checked through an automated spam detection service.
Save settings
Cookies settings