Yahoo Finance Crypto: Bank of England calls for tougher rules after $2tn plunge
The Bank of England warned that the $2tn (£1.67tn) crash in the value of cryptoassets shows vulnerabilities in the market and the need for tougher regulation of the crypto market.
The market capitalisation of the sector has tumbled to about $900bn from a peak of almost $3tn late last year.
“Both the experience that we’ve had in recent weeks and also the work that we’re doing both domestically and internationally, I think further draws out that there are issues both in the unbacked crypto world and the so called stablecoin,” governor Andrew Bailey said.
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The Bank said "extreme volatility" in recent months showed weaknesses in the market that led to fire sales, warning that further declines in prices could be amplified.
“These events did not pose risks to financial stability overall. But, unless addressed, systemic risks would emerge if cryptoasset activity, and its interconnectedness with the wider financial system, continued to develop,” the BoE said in its latest financial stability report.
Read more: Bank of England's Bailey on crypto: 'Be prepared to lose all your money'
“This underscores the need for enhanced regulatory and law enforcement frameworks to address developments in these markets and activities.”
Regulators in the UK and Europe have been toughening their rhetoric against the crypto industry, warning fallout from a market crash could hurt the broader financial system.
In a bid to rein in the “wild west'' of crypto assets, the European Union (EU) has announced rules will require that cryptocurrency firms provide information regarding the environmental impact of their assets.
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Last June, BoE governor Andrew Bailey again warned crypto investors that they could lose all their money as he said unbacked crypto assets have no intrinsic value.
"If you want to invest in these assets, okay, but be prepared to lose all your money," Bailey warned.
He added: "People may still want to buy them because they have extrinsic value ... people value things for personal reasons. But they don't have intrinsic value.
The world's largest crypto token bitcoin (BTC-USD) gained ground this Tuesday morning, hovering just above $20K.
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