Bank of England claims CRYPTO will cause the next Financial Crisis

By Lukros76 | Crypto Banter | 14 Oct 2021

Anyone on this site would probably agree with me that the title itself here is enough to make a person burst out in laughter and then shake their head in disgust and sheer bafflement as to how stupid this statement might be. And I haven't even told you about what it is they exactly said yet. So let's get to it.

Sir Jon Cunliffe, a senior Bank of England policymaker, warned that digital currencies like BTC would cause a financial meltdown unless the government steps in and heavily regulates the space. He then went on to compare the ever rising price of crypto to US SUB-PRIME MORTGAGES before the 2008 crash. I'll explain how insane this comparison is after a bit more context.

Matt Taibbi on the 10-Year Anniversary of the Crash - Rolling Stone

Of course $2.3tn (of crypto) needs to be seen in the context of the $250tn global financial system. But as the financial crisis showed us, you don’t have to account for a large proportion of the financial sector to trigger financial stability problems – sub-prime was valued at about $1.2tn in 2008

This is a quote referencing the comparison.

Cunliffe has played a central role in monitoring cryptocurrencies over recent years as an adviser to the G20’s financial stability board and the central banks’ overarching advisory body, the Geneva-based Bank of International Settlements. And despite this comparison being absolutely stupid he does make some generally valid points otherwise. Like the fact that futures and leverage are being pushed more and more by exchanges and are also used by a steadily rising number of people, which isn't a good thing since it is basically a risk within a risk making it all the more damaging if it fails.

The basis for his speculation is the idea that crypto is becoming increasingly connected to traditional finance (specifically funds and other businesses adding leverage and future to their portfolios) and that due to this, if the volatility of the space continues, the financial market will crash cause of all the speculative prices and as a lot of bankers like to say "lack of intrinsic value".

So... let's dissect.

  • Firstly, this is an obvious publicity stunt to move away from the reality that is plaguing England as well as a way to trick people that are too lazy to do some reasearch into blaming everything bad on something they don't understand in the first place. Here's the reality in England - 64c4f3310a5caa2b920aa2cb36ee128169f510802506c38e985ab930ac1dc683.png
  • Secondly, the idea that leverage and futures are going to become a large enough factor within monetary businesses kinda doesn't make sense. Since even outside of crypto only experienced traders or people with enough knowledge actually use these options specifically because they are that risky (and they haven't caused a problem through their use either). So seeing these same businesses use them in crypto which is from their perspective even riskier, doesn't add up.
  • Thirdly, my god is that mortgage comparison horrible. There is no ignoring problems within crypto like there was with mortgages, where banks just ignored the fact that riskier and riskier loans were being given out until it all boiled over and everyone got screwed. The only real connection between the two is that the price of both rose. The main difference being with mortgages it was a bubble and with crypto it's just the foundation that's slowly getting built on. How Mortgage Interest Is Calculated?

And a disclaimer with this one. I might be completely wrong and none of my own arguments or thoughts make any sense. Maybe you know better, cool, let me know and we can share the knowledge. I am not a financial adviser I just try and bring the info to the people.

Nothing else to say on my side... take it as you will. In my mind it is definitely an insane thing to say and a definite blame shift... others might disagree.

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