UK will hold back action against crypto ‘pockets of exuberance’ for now

UK will hold back action against crypto ‘pockets of exuberance’ for now


The Bank of England (BoE)’s latest Financial Stability Report, released twice yearly, acknowledges that increased crypto trading action and price volatility in 2021 signals that the sector is harboring “potential pockets of exuberance.”

The report notes that the top market cryptos, Bitcoin (BTC) and Ether (ETH), saw a sharp appreciation in value over the 12 months to April 2021 and that their subsequent drop by roughly 50% in May has left them “particularly volatile,” with prices skewed to the downside as of last month.

When it comes to the risks all this poses for financial stability, however, the central bank took a relatively sanguine line, noting that spillovers from the 2021 crypto bull run into wider financial markets were limited. The fact that the crypto market remains relatively insulated and confined to retail investors means that the bank does not feel that the risk potentially posed by the sector has begun to crystallize, warranting active intervention, in the words of BoE

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