With each year, financial market regulators are becoming more and more interested in broadly defined crypto-assets. Work is currently under way at EU level on a proposal for Regulation of the European Parliament and of the Council on Markets in Crypto-assets (‘MiCA’). The United States of America is also working to implement regulations covering this market. This is particularly relevant for exchanges and all kinds of tokens. One of the biggest changes will be the backing of assets with stablecoins and treating them as securities.
Another country which recognises the need to regulate the trade in crypto-assets is the United Kingdom. On 5 July, the Financial Policy Committee, a committee of the Bank of England (the UK’s central bank), published a quarterly report on financial stability. In the report, the Committee calls for a globally consistent regulatory framework for the digital assets market. Among the reasons, the Committee mentions the economic situation of the UK and the sharp falls in crypto-currency prices, which have revealed a series of weaknesses in the crypto-assets market. The Committee emphasises that those factors have no influence on the financial soundness of the UK’s financial market but that may change in the future.
The authors of the report point to the grey area in which exchanges operate, which is why their activities must be monitored. Moreover, stablecoins used for financial settlement do not ensure any level of security equal to the level offered by the money of the central bank or commercial banks. This refers to stable value, legal claims and the capacity for redemption at nominal value, in fiat currency.
This news comes from the website of the Bank of England, where the full report can be found: https://www.bankofengland.co.uk/financial-stability-report/2022/july-2022.