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In a speech yesterday, deputy governor Sir Jon Cunliffe said: “The financial crisis showed us, you don’t have to account for a large proportion of the financial sector to trigger financial stability problems.” He believes a collapse in the price of cryptocurrencies to as low as zero is “certainly a plausible scenario” – and that this would prompt “a possibility of contagion” across the world’s finance sector.
Comparing the crypto crash with other financial meltdowns, he reminded us in a speech at Sibos that sub-prime was valued at about $1.2tn in 2008 when it collapsed and the crypto market is now worth £1.7 trillion.
Largely unregulated cryptoassets have grown by 200 percent this year, from just under $800 billion to $2.3 trillion. Cunliffe has urged crypto to be regulated as a matter of urgency.
While the finance industry is more robust now than in 2008, governments need to be wary of overreacting to financial innovations.
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