BoE lays out crypto regulatory framework

The move comes as the crypto market falls increasingly under the the gaze of regulators amid concerns that if rules are not put in place its dramatic growth could pose risk to the broader financial system.

A regulatory framework for the burgeoning cryptocurrency market has been laid out by the Bank of England.

The crypto market has increasingly come under the regulatory gaze amid concerns that if rules are not put in place its dramatic growth could pose risks to the broader financial system. There are also concerns about investor losses amid volatile price swings.

The Bank of England’s financial policy committee said that the crypto market that mirrors financial services would be overseen by existing City rules.

"Where crypto technology is performing an equivalent economic function to one performed in the traditional financial sector, the FPC judges that this should take place within existing regulatory arrangements and that the regulatory perimeter be adapted as necessary to ensure an equivalent regulatory outcome,” the committee said in its latest update on financial stability.

The committee said that “direct risks” to UK financial stability from crypto markets are “currently limited” but this risk would change “if the pace of growth seen in recent years continued".

The Bank’s Prudential Regulation Authority has sent a letter to the bosses of banks, insurers and investment firms it oversees calling on them to be watchful of cryptocurrency risks.

The crypto sector globally grew tenfold between early 2020 and November 2021, and now stands at $1.7 trillion or 0.4 per cent of global financial assets, with over 17,000 different crypto asset tokens in circulation, according to Reuters.