Bank of England warns firms to beware crypto-currencies
THE BANK of England has told company bosses to tread carefully when investing in cryptocurrency assets such as Bitcoin amid fears it could expose them to money laundering and terrorist financing.
The head of the Bank’s Prudential Regulation Authority (PRA), Sam Woods, has written to the chief executives of banks, insurance companies and designated investment firms “to remind them” of PRA rules and expectations regarding their firm’s “exposure to crypto-assets.”
Mr Woods said he was well aware that some companies have already taken stakes in crypto-assets, and are interested in the technology that underpins crypto-currencies such as Bitcoin, more commonly known as the blockchain or distributed ledger technology. However, he warned that the price of crypto-assets can fluctuate wildly and can be hard to sell.
“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 give also rise to reputational risks,” Mr Woods added.
The Bank said those stakes “should be considered fully” by each company’s board and signed off by the “highest levels of executive management”, who should have access to experts who can evaluate any risks stemming from exposure to those assets.
It also warned against linked bonuses or payouts so they do not encourage “excessive risk-taking”.
The letter echoes concerns raised by Bank of England Governor Mark Carney who in March launched an attack on crypto-currencies and called for regulation that would hold them to the same standards as the rest of the financial system.
Mr Carney branded cryptocurrencies a “failure” and a lottery.