Bank of England Looks To Minimize Crypto Risk With 'Enhanced Regulation'

BY Benzinga | ECONOMIC | 07/05/22 11:13 AM EDT

Bank of England's Financial Policy Committee has announced the need for improved regulation of the cryptocurrency sector, following the recent market crash.

What Happened: In an endeavor to prevent the large-scale risk in the crypto markets, the Bank of England's Financial Policy Committee stated the urgent need for "enhanced regulation". The Financial Policy Committee endeavors towards stability in crypto markets, via central bank involvement.

The past few months have seen over $2 trillion flowing out of the crypto sector. Consequently, cryptocurrency lending and borrowing firms globally, such as 3AC and Celsius (CRYPTO: CEL) Network, have experienced extreme illiquidity.

The past week saw the European Union promoting and concurring on cryptocurrency regulation to be implemented by the closing of 2023.

Also Read: Here's How Much Elon Musk, Jeff Bezos And Top 10 Billionaires Lost In The First Half of 2022

The Financial Stability Report released by the committee, on July 5, emphasizes the susceptibilities within the crypto market, highlighted by the extreme volatility seen in the recent price drawdowns. Thus, calling for regulatory practices and legal oversight in the crypto sector, the Bank of England looks to protect investors from drastic market volatility.

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.