BOE Says Growth of Crypto Could Pose Risks for Financial Stability

Crypto assets currently pose limited risks to the stability of the U.K. financial system, the Bank of England said in its Financial Stability Report, released Monday. But their pace of growth means they could become more dangerous as they become increasingly linked to wider financial networks.

• “Material growth in banks’ exposures to unbacked crypto assets would expose them to financial, operational and reputational risks,” the central bank said. While no major U.K. banks have reported direct exposure to crypto, the BOE said, they are starting to offer services such as derivatives trading and custody.
• If institutional investors are exposed to crypto as a “core part” of their investments, a steep fall in crypto values could lead them to sell other assets and possibly “transmit shocks through the financial system.”
• The bank called for “enhanced regulatory and law enforcement frameworks, both domestically and at a global level.”
• Growth in crypto asset exposure needs to be met with transparency in reporting, it said.