Mind the gap between expectations and reality.
“In their short history, crypto-assets have exhibited high price volatility and relative illiquidity,” wrote Sam Woods, deputy governor of the Bank of England’s Prudential Regulation Authority, on Thursday. “Crypto-assets also raise concerns related to misconduct and market integrity many appear vulnerable to fraud and manipulation, as well as money-laundering and terrorist financing risks. Entering into activity related to crypto-assets may [also give] rise to reputational risks.”
The civil servant brought up a myriad of concerns related to cryptocurrencies and blockchain-based assets in a letter to CEOs of banks, insurance companies, and designated investment firms. Woods continued:
“I remind you of your firm’s responsibilities under the PRA’s Fundamental Rules 3, 5 and 7 to: (i) act in a prudent manner; (ii) have effective risk strategies and risk management systems; and (iii) deal with regulators in an open and co-operative way, and disclose appropriately anything relating to your firm of which we would reasonably expect notice.”
His cautionary note about crypto-assets emphasized the importance of oversight by senior management and instructed that “firms’ remuneration policies and practices do not encourage excessive risk-taking.”
Woods also noted that “Although classification will depend on the precise features of the asset, crypto-assets should not be considered as currency for prudential purposes.”
source : www.ethnews.com