Jon Cunliffe: Some lessons from the crypto winter

Speech by Sir Jon Cunliffe, Deputy Governor for Financial Stability of the Bank of England, at the Eden Hall, the British High Commissioner's Residence, Singapore, 12 July 2022.

The views expressed in this speech are those of the speaker and not the view of the BIS.

In recent months we have seen a dramatic bout of instability and losses in crypto markets – dubbed by some commentators as the 'crypto-winter'. A widespread collapse of crypto-asset valuations has cascaded through the crypto ecosystem and generated a number of high-profile firm failures. The totemic indicator of the crypto winter is that Bitcoin, the signature crypto asset, has lost 70% of its value since November.

Regulators, of course, have not been slow to comment. And, true to type, I want today to pull out four lessons I think we can draw from this episode:

• Technology does not change the underlying risks in economics and finance;
• Regulators should continue and accelerate their work to put in place effective regulation of the use of crypto technologies in finance;
• This regulation should be constructed on the iron principle of 'same risk, same regulatory outcome' ;
• Crypto – technologies offer the prospect of substantive innovation and improvement in finance. But to be successful and sustainable innovation has to happen within a framework in which risks are managed: people don't fly for long in unsafe aeroplanes.

Let me elaborate on these in turn.