BoE: FTX Collapse Offers Need for Crypto Regulation

Bank of England Deputy Governor John Cunliffe warned Monday that the recent collapse of cryptocurrency exchange FTX shows the urgency of rigorously regulating the cryptocurrency industry.

The official stressed that cryptocurrency trading should be subject to clear and precise rules by financial oversight agencies. Otherwise, unregulated digital money and companies will threaten the stability of the broader financial system.

The fall of FTX, the world’s second largest cryptocurrency exchange by trading volume, which was owned by former billionaire St. Barman Fried, has deepened the crisis in the digital finance industry known as the crypto winter.

In addition, this crisis revealed that there are serious flaws in the way major digital asset trading firms operate due to the lack of corporate controls and misuse of client funds.

More controls and supervision

During a speech at a political event, Cunliffe stressed the urgent need to strengthen the supervision and oversight activities of DeFi firms before the stability of the global economy is seriously threatened.

Fortunately, according to the official, the digital finance sector is not “big enough” or interconnected enough with traditional finance to endanger the stability of the traditional financial system.

But he cautioned that these links with the international financial system are developing very quickly.

“We should not wait until it is large and connected to develop the regulatory frameworks necessary to prevent a crypto shock that could have a much greater destabilising impact,” Cunliffe said.

FTX filtering, which is implemented by filter unit Appointed by the Bahamas regulator, and overseen by the exchange’s current CEO, John Ray III. A veteran bankruptcy lawyer said last week that the company’s management failures were worse than those of bankrupt US energy company Enron in 2001.

Financial Markets and Services Bill

So far in Britain, financial regulators only supervise cryptocurrency trading firms to prevent money laundering. However, they did not go deep into supervising its management and organization.

UK lawmakers are currently pushing the government for the Financial Conduct Authority and the Prudential Regulatory Authority to take over and oversee most of the cryptocurrency sector.

The Chancellor of the Exchequer, Andrew Griffiths, introduced an amendment to the Financial Services and Markets Bill to Parliament, whose debate ended on November 3. Through this legal tool, regulators will be able to develop a comprehensive regulatory framework for cryptocurrency trading.

According to Cunliffe, the Bank of England plans to hold consultations soon on the possibility of extending investor protection guarantees, as well as on market safety and other regulatory provisions for the digital asset sector.

The FTX explosion has renewed the interest of global regulators and lawmakers to discuss and adopt regulatory frameworks for the crypto space as soon as possible. Everyone understands that while digital finance is a reality and a necessity, its regulation cannot wait.

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