The Bank of England wants to enhance the crypto regulatory framework

On Tuesday, the bank's Financial Policy Committee (FPC) addressed cryptocurrencies briefly in its financial stability report.

According to the paper, while crypto poses a less immediate risk, it is nonetheless necessary to monitor.

The report specifically mentioned the market's worth, which plummeted below $1 trillion in June after reaching a record of $3 trillion in November.

These flaws included the following:

"Liquidity mismatches cause run dynamics and fire sales, as well as leveraged positions unwinding and exacerbating price collapses. Investors' faith in the ability of many so-called "stablecoins" to keep their pegs has been considerably eroded, particularly those with no or riskier supporting assets and reduced transparency."

While the report suggests that these risks do not constitute a threat to the overall stability of financial markets, it does advocate for greater regulatory clarity as the industry matures.

"This highlights the need for strengthened regulatory and law enforcement structures to address advances in these markets and activities," according to the research.

Stablecoins were then singled out as needing extra oversight because "certain stablecoins held to be used for payments may not give identical guarantees to central bank or commercial bank money."

The committee anticipates that cryptocurrencies will meet "similar standards to commercial bank money in terms of value stability, legal claim robustness, and ability to redeem at par in fiat."

The US-UK Financial Innovation Partnership met for the third time last week in London to discuss crypto and digital asset legislation in advance of a financial working group meeting between the two countries later this month.

Stablecoins and central bank digital currencies were also discussed at the summit.

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