Mind the gap between expectations and reality.
"In their short history, crypto-assets have exhibited high price volatility and relative illiquidity," wrote Sam Woods, deputy governor of the Bank of England's Prudential Regulation Authority, on Thursday. "Crypto-assets also raise concerns related to misconduct and market integrity – many appear vulnerable to fraud and manipulation, as well as money-laundering and terrorist financing risks. Entering into activity related to crypto-assets may [also give] rise to reputational risks."
The civil servant brought up a myriad of concerns related to cryptocurrencies and blockchain-based assets in a letter to CEOs[1] of banks, insurance companies, and designated investment firms. Woods continued:
"I remind you of your firm's responsibilities under the PRA's Fundamental Rules 3, 5 and 7 to: (i) act in a prudent manner; (ii) have effective risk strategies and risk management systems; and (iii) deal with regulators in an open and co-operative way, and disclose appropriately anything relating to your firm of which we would reasonably expect notice."
His cautionary note about crypto-assets emphasized the importance of oversight by senior management and instructed that "firms' remuneration policies and practices … do not encourage excessive risk-taking."
Woods also noted that "Although classification will depend on the precise features of the asset, crypto-assets should not be considered as currency for prudential purposes."
Matthew is a full-time staff writer for ETHNews with a passion for law and technology. In 2016, he graduated from Georgetown University where he studied international economics and music. Matthew enjoys biking and listening to podcasts. He lives in Los Angeles and holds no value in any cryptocurrencies.
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