Bank of England Deputy Governor Jon Cunliffe became the latest person to juxtapose the dot-com bubble to the current cryptocurrency crash.
BOE’s Take on Crypto Crash
Cunliffe said he expects crypto technology and finance will continue to survive in the coming months. Amidst the incessant declines, the exec highlighted that crypto and its underlying tech have significant applications and potential within the financial sector.
At the Point Zero Forum in Zurich, the Deputy Governor said,
“The analogy for me is the dot-com boom when $5 trillion was wiped off values. A lot of companies went, but the technology didn’t go away. It came back 10 years later, and those that survived — the Amazons and the eBays — turned out to be the dominant players.
Whatever happens over the next few months to crypto-assets, I expect crypto technology and finance to continue. It has the possibility of huge efficiencies and changes in market structure.”
He also said that crypto market players emerging out of the current crisis could potentially transform into the technology companies of the future, rivaling the existing behemoths such as Amazon and eBay.
Focus on Stablecoin Regulation and CBDC
As crypto’s hot streak cooled down, the result was rampant lay-offs and scammers running riot. The stablecoin market took a massive hit alongside cryptocurrencies. The fall of one – TerraUSD – attracted the ire of many regulators. The Bank of England, for one, criticized stablecoins, saying that they are unstable shortly after UST’s collapse.
Instead, it is developing a retail central bank digital currency, a consultation paper expected to be delivered by the year-end. The BOE is examining whether to create a fully independent CBDC with “on- or off-ramp to fiat” money or just “something that is flexible enough” to be used in private stablecoins.
The bone of contention for BOE, however, is – if it’s better to have private stablecoins to be more optimized in certain aspects, which then link back to a central bank ledger in some way, or should the central bank provide the base.
Enabling a “fully disintegrated settlement” will be a major predicament for the regulators as this system would mean regulating the AI code behind the crypto technology. Cunliffe believes this would be very difficult for the regulatory system to cross in the near future.
