On 12 July 2022, the Bank of England (BoE) published a speech by Sir Jon Cunliffe regarding lessons learned from the recent instability and losses in crypto markets (crypto winter). Sir Jon notes that in recent months there has been a dramatic bout of instability and losses in crypto markets – dubbed by some commentators as the ‘crypto-winter’.

He discusses:

  • How finance carries inherent risks and that technology can change the way these risks are managed and distributed but it cannot eliminate them. The majority of crypto-assets in circulation have proven to have very erratic swings in value – in both directions – as can be seen from the evidence of the last few months.
  • How regulators should continue and speed up their work to bring the use of crypto technologies in finance within the regulatory perimeter.
  • How future legislation should be designed on the principle of ‘same risk, same regulation’. The Basel Committee on Banking Supervision is in the process of issuing guidance on the prudential treatment of cryptoassets held by banks and the International Organization of Securities Commissions is looking at the application of the standards for investor protection and market integrity across cryptoassets.
  • How appropriate regulation will support innovation.

Sir Jon mentions that the BoE intends to apply the ‘same risk, same regulatory outcome’ approach in the UK. The Government has announced its intention to legislate in the current session of Parliament to update the powers of the BoE and the FCA to regulate and supervise stablecoins. The BoE hopes to issue a consultation document on the regulatory policy framework later this year.

Sir Jon also mentions that the Financial Stability Board will publish a consultation report later this year with recommendations for promoting international consistency in regulatory and supervisory approaches to non-stablecoin cryptoassets, markets and exchanges as well as for strengthening international coordination in this area.