The Bank of England’s Financial Policy Committee called for “improved regulation” of the crypto-asset market to reduce potential risks.
The committee said that the recent market turmoil of crypto-assets doesn’t represent a danger to the broader financial system yet. It might in the future as they become more integrated into mainstream finance. This was according to the meeting summary notes released Tuesday. The committee looks at the role of the central bank in keeping the economy stable.
The crash of Terra’s stablecoin in May was a huge blow. The crypto lenders like Celsius Network and Babel whose Finance froze withdrawals last month. These incidents made regulators pay more attention to the digital asset industry. The market value has dropped by more than $2 trillion in the last few months.
“This underscored the need for enhanced regulatory and law enforcement frameworks to address developments in crypto-asset markets and activities,” the bank said in its Financial Stability Report.
The Treasury has already said that the Bank of England is looking into adding systemic stablecoins to its administration. This would mean that the central bank would regulate stablecoins that are connected to the broader financial system. The report says that a systemic stablecoin backed by a deposit at a commercial bank might endanger financial stability.
The U.K.’s financial industry regulator, the Financial Conduct Authority, said it will think about the collapse of Terra’s coins when making new rules for the industry.
The U.K. is not the only country calling for policies to protect against crypto-assets risks to financial stability. The European Systemic Risk Board is in charge of ensuring the EU’s financial system is stable. Thet said recently that it wanted to work with regulators worldwide to set standards to protect against crypto assets that could have an effect on the financial system.