Two Crypto experts are among those to have reacted to Jon Cunliffe, the Bank of England Deputy Governor for financial stability, calling for cryptocurrencies to be regulated as a matter of urgency and warning that a massive crypo market crash could be a realistic scenario.
This debate sits against the backdrop of Bitcoin a shade off a six-month high at 10am this morning (15 October) at around $58,000, as market sentiment rose on the expectation that the Securities and Exchange Commission (SEC) is poised to allow its first US Bitcoin futures ETF.
Bitcoin has doubled in value this year and has got closer to April's record high of $64,895.
Haphazard legislative efforts could as well cripple the space, discourage investors from participating, and - paradoxically - contribute to the so-called "market crash" they are allegedly meant to avert."
Mikkel Morch, executive director & risk management at crypto/digital assets hedge fund ARK36, said: "The calls for more regulation in digital asset investments are, in principle, a much welcome sign of the broadening adoption of these assets.
Careful and sensible regulation could indeed support the move of smart money into the space and reduce the volatility of crypto in general. On the other hand, rushed regulation is rarely good regulation. It is therefore of potential concern that Sir Jon Cunliffe calls regulating crypto a "matter of urgency".
Morch added: "Digital assets have become one of the most innovative, vibrant, and profitable industries partly due to the fact that they have been allowed to grow without much involvement from the regulators.
Now, it may be time for the regulators to step in and help the space achieve greater maturity. However, haphazard legislative efforts could as well cripple the space, discourage investors from participating, and - paradoxically - contribute to the so-called "market crash" they are allegedly meant to avert.
In any case, comments like the one made by Sir Jon Cunliffe are a testament to the fact that digital assets have indeed become too large to ignore even by some of the oldest and most traditional financial institutions. This should give investors more confidence in the digital asset market's resilience - despite the alarmist tone of Cunliffe's comments."
Martha Reyes, head of research at digital asset prime brokerage and exchange BEQUANT, said: "We welcome further regulation in the space as it will attract more capital and interest, and this is already happening. However, it is a stretch to say that the sector threatens financial stability.
Volatility has actually fallen as institutions have become more active in the asset class. Crypto has already undergone steep sell offs, the latest one this spring, without repercussions for other markets. Regulators need to embrace the technological innovation of the blockchain, and incorporate the assets into a regulatory framework without engaging in unnecessary fear mongering."