In the cryptocurrency economy, the supply of credit through the banking system could disappear, warned Bank of England Deputy Governor Sir Jon Cunliffe. That would be a change with “profound economic consequences,” he added, emphasizing the risks from Facebook’s Libra project and global stablecoins.
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‘Profound Economic Consequences’
Bank of England Deputy Governor Sir Jon Cunliffe warned on Friday that bank lending could dry up in the cryptocurrency economy. In a speech given at the London School of Economics, he explained that there is “a new wave of technological development that enables the transactional use, not of central or commercial bank money, but rather a new form of asset, so-called ‘crypto-assets.'”
Cunliffe, who was previously a British envoy to the European Union, proceeded to talk about stablecoins. “There is certainly the possibility with stablecoins linked to large technology and social media platforms that it could become mainstream for people to move from holding all or much of the money now in ‘current accounts’ at banks to holding it in ‘stablecoin’ in virtual ‘wallets’ provided by non-banks,” the Bank of England’s deputy governor for financial stability described, adding:
In such a world, and depending how and whether stablecoins were backed with other financial assets, the supply of credit to the real economy through the banking system could become weaker or indeed disappear. That would be a change with profound economic consequences.
Risks From Facebook’s Libra and Stablecoins
The Bank of England has previously warned about Libra and other new forms of payment which they say must be considered carefully before
