Jon Cunliffe: Reflections on DeFi, digital currencies and regulation

Speech by Sir Jon Cunliffe, Deputy Governor for Financial Stability of the Bank of England, at the Warwick Business Schools's Gilmore Centre Policy Forum Conference on DeFi & Digital Currencies, London, 21 November 2022.

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

I had intended today to talk about the work the Bank of England, is doing with the Treasury, the FCA on the regulation of crypto stablecoins and our work on a potential central bank digital currency in Sterling.

That remains the bulk of what I will talk about today. But between beginning to draft these remarks and delivering them today, we have seen what is probably the largest – and certainly the most spectacular – failure to date in the crypto ecosystem, by which of course I mean the collapse of the crypto trading platform FTX and most of its associated businesses.

So I thought it might be worthwhile to start with a brief look at the FTX implosion to frame some of the points I intend to make on regulation of the use of crypto-related technologies to provide financial services and on why, as a central bank, we are actively exploring the issuance of a digitally native Pound sterling.

Untangling exactly what happened at FTX will no doubt take a great deal of time, effort and investigation by the relevant authorities. For anyone interested in the scale of the challenge, I can only recommend a quick read of last week's bankruptcy filing. But while we will not know in full how it happened for some time, there do appear to be some general themes that are very familiar to those who regulate and supervise conventional financial firms and financial instruments.