The cryptocurrency economy can weaken or even eliminate the practice of bank lending. This was stated by Jonathan Stephen Cunliffe, Deputy Governor for Financial Stability, Bank of England.
According to him, the integration of stablecoins in social networks can lead to the fact that people will cease to trust the storage of their funds to banks.
“In such a world, and depending on how and whether stablecoins were backed with other financial assets, the supply of credit to the real economy through the banking system could become weaker or indeed disappear. That would be a change with profound economic consequences,” he stressed.
Cunliffe emphasized that virtual currencies pose “very important issues” for the UK government, regulators and the Bank of England. He called on regulators and central banks to prepare for the unique challenges that the emerging cryptocurrency ecosystem poses.
The official recognized the effectiveness of the financial system as doubtful since it “economically the equivalent of 18th-century bank clerks with quill pens altering their banks’ ledgers to debit one account and credit another”. Stablecoins offer a number of advantages, including “a significant reduction in the cost of payments, especially cross-border ones” and “greater financial affordability due to simple and cheap access to payment services”.
Cunliffe warned that due to the size of the Facebook audience, the Libra stablecoin in a short time can reach a high level of acceptance and become “systemically important” in the traditional financial world.
He recalled that this year the Financial Stability Board will issue a report that addresses “regulatory recommendations for stablecoins.”
Earlier, Bank of England Governor Mark Carney said that digital currency from Facebook will require strict regulation