Crypto crash survivors become tomorrow's Amazons: BOE

LONDON • The survivors of the rout in crypto assets could become the technology companies of the future rivalling and eBay, Bank of England (BOE) deputy governor Jon Cunliffe said.

Sir Jon compared the crash that has wiped more than US$1 trillion (S$1.4 trillion) off the value of Bitcoin and other crypto currencies this year with the dotcom collapse at the start of the millennium.

"The analogy for me is the dotcom boom, when US$5 trillion was wiped off values," he said at the Point Zero Forum in Zurich yesterday.

"A lot of companies went, but the technology didn't go away. It came back 10 years later, and those that survived - the Amazons and the eBays - turned out to be the dominant players."

He stressed that crypto technology has "huge applications and potential within the financial sector" even though the market is wobbling at the moment.

"Whatever happens over the next few months to crypto assets, I expect crypto technology and finance to continue," he said.

"It has the possibility of huge efficiencies and changes in market structure."

The BOE is developing plans for its own retail central bank digital currency (CBDC) and will deliver a consultation paper at the end of the year.

One key issue under investigation is whether to produce a fully independent CBDC with an "on or off ramp to fiat" money or just "something that is flexible enough" to be used in private stablecoins.

Sir Jon gave an example of stablecoins that are integrated into supply chain and logistics systems to maximise efficiency. "We couldn't provide something that does all those things," he said.

"The question is, are you better off having private stablecoins to be more optimised in certain areas, which then link back to a central bank ledger in some way? Or should we provide the base?" Sir Jon said.

The big philosophical question regulators face is whether to allow "fully disintegrated settlement," which would mean regulating the artificial intelligence code behind the crypto technology.

"I have the same confidence in that as a fully automated pilot-less plane from London to Zurich, or a fully driverless car," he said. "I want to know where the liability is - if the algo goes wrong and I crash.

My sense is that will be very difficult for the regulatory system to cross in the near future."

To be sure, crypto bulls seem to believe that winter may have passed as several currencies rose sharply yesterday.

Bitcoin, the most widely held cryptocurrency, rose to trade above US$21,000 after falling close to US$17,000 over the weekend.

Ether, the second-most popular token, also rose.

Altcoins, including XRP, Cardano, Dogecoin and Polkadot, all rallied as well.


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A version of this article appeared in the print edition of The Straits Times on June 23, 2022, with the headline Crypto crash survivors become tomorrow's Amazons: BOE. Subscribe