On 14 October 2021, the Deputy Governor of the Bank of England warned of the urgency of regulating cryptocurrencies due to the ‘plausible’ risk of a collapse in the crypto market. Sir Jon Cunliffe warned that the risk of contagion from a cryptocurrency crash was low at present, though that could change in the near future.

Following Sir Jon’s remarks and the news that the size of the digital currency market has grown from $800m to $2.3tn in the last year, I hope that you will be interested in the below article idea from Managing Associate Daniel Alexie, specialist financial services lawyer at MPR Partners.

Daniel will analyse the Deputy Governor’s remarks and explain that regulation of crypto assets, if it is to be successful, must adopt a holistic approach, considering the ramifications for taxation, IT, financial crime and environmental concerns among other fields.

He will then explore the potential pitfalls of the Bank’s approach and argue that overly stringent regulation may force the cryptocurrency market underground in order to evade regulatory scrutiny or even stymie much-needed innovation in financial technologies.

Daniel will assert that in order to avoid these pitfalls, regulators must consult players in the digital currencies market in order to fully understand the technology behind crypto assets and not merely adapt existing regulatory concepts or terminologies which may be ineffective as well as potentially dangerous.

It will be concluded that such an approach will allow regulators to develop a legal framework that not only delineates the conditions to be followed when issuing or trading cryptocurrencies but also ensures that such digital currencies will continue to play an important role in technological advancement and innovation.