Today the Bank of England published its Financial Stability Report, which calls for greater regulation of the crypto-asset sector. So far, the traditional financial system has very little exposure to crypto-assets, meaning there’s been little stability risk from the recent crypto crash.
However, as commercial banks get more involved in the sector, the interconnectedness will increase systemic risk. “This underscores the need for enhanced regulatory and law enforcement frameworks to address developments in these markets and activities,” said the Financial Policy Committee (FPC).
The FPC noted that the crypto crash was similar to past events in the traditional system. These include fire sales and leverage amplifying price falls.
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