By Marcus Sotiriou, Analyst at the UK based digital asset broker GlobalBlock
Bitcoin remains below the 2017 all-time-high which is concerning for bulls. The LUNA and UST crash has led to a tragic contagion amongst other crypto firms, as we have seen liquidity withdrawn from the crypto market at an extraordinary rate.
In the Bank of England’s financial stability report on Tuesday, the bank’s Financial Policy Committee (FPC) briefly addressed cryptocurrencies. The report noted that while crypto poses a less immediate risk it is nonetheless important to monitor, as several vulnerabilities have been exposed during the recent market downturn. The bank noted the following vulnerabilities:
“Liquidity mismatches leading to run dynamics and fire sales, and leveraged positions being unwound and amplifying price falls. Investor confidence in the ability of certain so-called ‘stablecoins’ to maintain their pegs was weakened significantly, particularly those with no or riskier backing assets and lower transparency.”
Unfortunately, the UK’s financial watchdog (FCA) is well behind the curve. Just 33 crypto companies have been awarded licenses in the U.K. so far. The current regulatory direction of the U.K. puts the country at risk of falling behind the U.S., European Union, and other regions.
Last week, domestic watchdogs from the U.K. and U.S. participated in a meeting and acknowledged the importance of teaming up to strengthen regulatory outcomes for crypto whilst supporting innovation.
This is a step in the right direction, however, there’s a lot of work to be done if the U.K. wants to live up to the goal of becoming the ‘global hub’ for crypto.