FTX collapse shows crypto is ‘too dangerous’ not to regulate, Bank of England deputy governor says
Cryptocurrency trading is “too dangerous” to remain outside mainstream financial regulation and could pose “a systemic problem” without action, the deputy governor of the Bank of England has warned.
Speaking for the first time since the founder of the crypto trading platform FTX was arrested and charged with massive fraud, Sir Jon Cunliffe told Sky News the Bank is considering regulation to protect retail investors in the “casino” of crypto trading, as well as the wider financial system from potential crypto shocks.
Sam Bankman-Fried was extradited on Wednesday from the Bahamas to the US where he will appear in a New York court charged with eight counts of fraud, money laundering and breaking campaign finance.
The collapse of FTX left more than one million customers unable to withdraw assets worth an estimated $8bn.
Prosecutors allege he used FTX’s customers’ money to cover losses in his private crypto hedge fund Alameda Capital in what the company’s new chief executive told Congress was “old-fashioned embezzlement”.
An estimated 80,000 of FTX’s customers are based in the UK, with individual liabilities as high as £5m in life savings according to a lawyer acting for dozens of victims.
Louise Abbott, a crypto-fraud specialist, told Sky News: “These individual investors have invested anything from a couple of thousand pounds up to about £5m, so massive amounts of money, all completely frozen, I’m going to use the word frozen rather than lost, because hopefully there is going to be something given back to them at some point. But this is huge money, huge money lost or stuck, or frozen in time.”
Crypto credibility
The episode is a huge blow to the credibility of cryptocurrencies, digital assets that draw their value not from state backing, but from relative scarcity and the willingness of other investors to trade in them.
Mr Bankman-Fried had cultivated links in Washington and on Wall Street, making millions of dollars in political donations and attracting high-profile investors to his platform.
His fall has emphasised the volatility of crypto investment and the lack of regulation in an industry that, despite widespread scepticism, is attracting growing attention from the financial mainstream.
Efforts to regulate
In the UK, regulators have tried and failed to impose their writ on crypto exchanges domiciled offshore, while the government has a goal, set out in April by Rishi Sunak when he was chancellor, to make the UK a “global crypto assets hub”, an ambition that depends in large part on effective regulation.
Sir Jon, deputy governor with responsibility for financial stability, told Sky News the Bank’s regulation efforts were aimed at protecting individuals and maintaining financial stability.
Deputy Governor of the Bank of England Jon Cunliffe
“There’s a lot of activity that’s developed over the last 10 years on the trading and sale of crypto assets, assets without any intrinsic value, so they’re incredibly volatile. And all of that has grown up outside of regulation,” he said.
“What we saw in FTX… is a number of activities which in the regulated financial sector, would have had certain protections. We saw things like clients’ money appears to have gone missing, conflicts of interest between different operations, transparency, audit and accounting. All of the perhaps boring things that happened in the normal financial sector, didn’t really happen in that set of activities. And as a result, I think a lot of people have lost a lot of money.”
Comparing crypto trading to a casino, Sir Jon said investors who wanted to speculate should be able to do so without the risk of losing access to their funds.
“It is in effect, in my view, a gamble, but we allow people to bet, so if you then want to get involved in that you should have the ability to in a place that is regulated in the same way that if you gamble in a casino it’s regulated. You should have the full information on the tin as to what you’re doing.”
The Bank also has to address the risk to financial stability that could flow from digital assets as institutional investors and banks explore exposure to an estimated $1trn in crypto assets.
“This trading of crypto assets was not big enough to destabilise the financial system, but it was starting to develop links with the financial system,” Sir Jon said. “I don’t know how that will develop. But we had banks and investment funds and others who wanted to invest in it. I think we should think about regulation before it becomes integrated with the financial system and before we could have a potential systemic problem.
“So I don’t think it will be possible to say this can be just kept outside of the financial system. It’s too dangerous. I think it is difficult but possible to say, let’s bring it in, where and when we think we can manage the risk to the standards we’re used to.”
Potential for blockchain
While cryptocurrencies have proved consistently volatile since the inception of Bitcoin 14 years ago, the underlying technology, blockchain, is considered to have significant potential across industries to manage data, and speed up and simplify transactions.
Blockchain provides proof of transactions on a public record known as a distributed digital ledger.
Each new exchange of cryptocurrency is recorded on a “block” which is added to the “chain” containing details of the new transaction and the previous transaction, meaning it can only be falsified by altering all previous links.
The system is maintained and overseen by every computer linked to the network rather than a central monitoring entity.
Mercedes is exploring the potential of blockchain to manage the data that will enable autonomous driving, while Vodafone is exploring its utility in managing the billions of micro-transactions that will be facilitated by the next generation of internet technology.
‘Smart money’ could also simplify global supply chains, with the prospect of micro transactions using stable tokens being linked to individual parts in production processes.
“There are technologies here which could, and I stress could, be of real use in the normal financial system, more efficient ways of doing things, potentially more resilient ways of doing things,” said Sir Jon.
“That hasn’t been proven in the crypto world. But if we could provide a regulatory space where people can see if they can develop products using this, we might be able to get the benefit of some of those technologies.”
The Bank of England’s own digital coin
As part of this process the Bank of England is consulting on plans to develop its own central bank digital coin, an electronic version of sterling that would carry the same security as a pound coin, but with the digital flexibility that could one day replace cash.
“Physical cash will always be made available by the bank as long as people want it and many people depend on it. But it’s not fully usable in the way we live now. So the question for the Bank of England is that as the way we as society changes, as we live our lives more digitally, should we continue to provide money to the public which is usable across a range of transactions?
“This would be a digital equivalent of the’ I promise to pay the bearer’ promise, which in the end underpins confidence in money in the UK. Whenever you want, you can turn that money you hold in the bank into basically Bank of England money backed by the state with that promise to pay the bearer.
“We want to ensure that as physical cash becomes less usable in many parts of the economy, perhaps we need to offer something digitally to provide that underpinning.”
UK
GPs can prescribe weight loss jabs on the NHS from today – but strict eligibility criteria in place
GPs will be able to prescribe weight loss jabs on the NHS from today.
About 220,000 people with the “greatest need” are set to receive Mounjaro – with strict criteria for the first year of the rollout.
Initially, only those with a body mass index of over 40 who have at least four other health problems linked to obesity will be eligible.
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Can you get pregnant when on weight loss drugs?
Some doctors have raised concerns about the additional workload this new programme will bring, while pharmacists fear it could lead to supply shortages.
While an estimated 1.5 million people are now taking weight loss drugs across the UK, they could previously only be accessed through specialist services or private prescriptions.
Dr Claire Fuller from NHS England said: “We urgently need to address rising levels of obesity and prioritise support for those who are experiencing severe ill health – and greater access to weight loss drugs will make a significant difference to the lives of those people.”
She added: “While not everyone will be eligible for weight loss drugs, it’s important that anyone who is worried about the impact of their weight on their health discusses the range of NHS support available with their healthcare professional.”
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Weight loss drugs ‘changing way we see obesity’
The chairwoman of the Royal College of GPs welcomed NHS England’s decision to pursue a phased rollout, and said current workloads must be factored in to ensure the jabs can be prescribed safely.
Professor Kamila Hawthorne went on to say: “While weight loss medications have a lot of potential benefits for patients who are struggling to lose weight and who meet all the clinical criteria for a prescription, they mustn’t be seen as a ‘silver bullet’ to aid weight loss.
“We also need to see a focus on prevention, stopping people becoming overweight in the first place so they don’t require a medical intervention later.”
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‘How I tried to get weight loss drugs’
Her remarks were echoed by the National Pharmacy Association’s chairman Olivier Picard, who says “prescribing these medications alone misses the point”.
He argued that they need to be part of a comprehensive strategy that includes lifestyle coaching, exercise and nutritional guidance – but many GPs currently “lack the bandwidth” to provide this support.
“As a result, we could end up in a situation where patients are prescribed the medication, lose weight, and then experience rebound weight gain once the course ends – simply because the foundational lifestyle changes weren’t addressed,” Mr Picard added.
Estimates suggest about 29% of the adult population is obese.
Health Secretary Wes Streeting says the government “is determined to bring revolutionary modern treatments to everyone who needs them, not just those who can afford to pay”.
UK
Met Police chief ‘frustrated’ at planned protest to support Palestine Action – as government moves to ban the group
Metropolitan Police Commissioner Sir Mark Rowley says he is “shocked and frustrated” at a planned protest in support of Palestine Action.
The demonstration, due to take place in Westminster later, comes as the government moves to ban the group under anti-terror laws.
Activists from Palestine Action hit the headlines last week after targeting RAF Brize Norton and damaging two military aircraft in a significant security breach.
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Why did activists target an RAF base?
Home Secretary Yvette Cooper will update MPs on the move to proscribe the organisation, which would make it a criminal offence to belong to or support it.
Sir Mark said that – until this happens – the force has “no power in law” to prevent the protest from taking place, but lawbreakers will be “dealt with robustly”.
He added: “This is an organised extremist criminal group, whose proscription as terrorists is being actively considered.
“Members are alleged to have caused millions of pounds of criminal damage, assaulted a police officer with a sledgehammer and last week claimed responsibility for breaking into an airbase and damaging aircraft.
“Multiple members of the group are awaiting trial accused of serious offences.”
He added that – while the right to protest is essential – “actions in support of such a group go beyond what most would see as a legitimate protest”.
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Trump’s golf course in Ayrshire was vandalised by Palestine Action. Pic: PA
Over the weekend, Business Secretary Jonathan Reynolds said he could not rule out the possibility of a foreign power being behind Palestine Action.
Any move to proscribe the group must be debated and approved by MPs and peers.
Speaking to Sunday Morning With Trevor Phillips on Sky News, former justice secretary Lord Charlie Falconer suggested that vandalising aircraft would not solely provide legal justification for such a move.
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Plans to ban activist group criticised
Lord Falconer said: “I am not aware of what Palestine Action has done beyond the painting of things on the planes in Brize Norton, they may have done other things I didn’t know.
“But generally, that sort of demonstration wouldn’t justify proscription so there must be something else that I don’t know about.”
Palestine Action has staged a series of protests in recent months – spraying the offices of Allianz Insurance in London, and vandalising Donald Trump’s golf course in Ayrshire.
Sir Keir Starmer has said stability in the Middle East is “a priority” following US strikes on Iran’s nuclear facilities, as the world has reacted to the attack.
The prime minister also called on Iran to “return to the negotiating table” to “reach a diplomatic solution to end this crisis”.
Follow latest: Iran considering ‘all options’ after US strikes
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US strikes on Iran explained
In a statement, Sir Keir said: “Iran’s nuclear programme is a grave threat to international security.
“Iran can never be allowed to develop a nuclear weapon, and the US has taken action to alleviate that threat.
“The situation in the Middle East remains volatile and stability in the region is a priority.
“We call on Iran to return to the negotiating table and reach a diplomatic solution to end this crisis.”
The UK was not involved in the strikes but was informed about them in advance by the US, Business Minister Jonathan Reynolds told Sky News’ Sunday Morning with Trevor Phillips.
Sir Keir and Foreign Secretary David Lammy had been pushing for a diplomatic solution. On Thursday, the prime minister warned of a “real risk of escalation” in the conflict.
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Trump: Iran strikes ‘spectacular success’
The US struck three sites in Iran early on Sunday morning, with Donald Trump boasting the country’s key nuclear sites were “completely and fully obliterated” in an address to the nation from the White House and warned there could be further strikes if Iran retaliates.
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What happens next is largely in Iran’s control
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‘Trump’s bold decision will change history’
Netanyahu praises Trump
Israel‘s Prime Minister Benjamin Netanyahu praised Mr Trump for the strikes, saying: “Your bold decision to target Iran’s nuclear facilities with the awesome and righteous might of the United States will change history…
“History will record that President Trump acted to deny the world’s most dangerous regime the world’s most dangerous weapons.”
UN secretary-general ‘gravely alarmed’ by US attack
But UN secretary general Antonio Guterres said he was “gravely alarmed by the use of force” by the US against Iran.
“This is a dangerous escalation in a region already on the edge – and a direct threat to international peace and security. There is a growing risk that this conflict could rapidly get out of control – with catastrophic consequences for civilians, the region, and the world.”
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European Union foreign policy chief Kaja Kallas urged all sides to step back and return to the negotiating table. “Iran must not be allowed to develop a nuclear weapon,” she said in a post on X.
“I urge all sides to step back, return to the negotiating table and prevent further escalation,” she said, adding that EU foreign ministers will discuss the situation tomorrow.
Cuba’s President Miguel Diaz-Canel. Pic: Reuters
How the world reacted to the strikes
Cuba’s President Miguel Diaz-Canel said on X: “We strongly condemn the US bombing of Iran’s nuclear facilities, which constitutes a dangerous escalation of the conflict in the Middle East.
“The aggression seriously violates the UN Charter and international law and plunges humanity into a crisis with irreversible consequences.”
Venezuela’s foreign minister Yvan Gil said his country’s government “condemns US military aggression” and “demands an immediate cessation of hostilities”.
In a statement, an Australian government spokesperson said Iran’s nuclear and ballistic missile programme “has been a threat to international peace and security”.
Japan’s Prime Minister Shigeru Isiba. Pic: Reuters
Japan’s Prime Minister Shigeru Ishiba said it is “crucial that there be a quick de-escalation of the conflict”.
Italy’s foreign minister Antonio Tajani said after the attack that his country’s government hopes “a de-escalation can begin and Iran can sit down at the negotiating table”.
The US attack came after more than a week of strikes by Israel, which have significantly degraded Iran’s air defences and offensive missile capabilities, and damaged its nuclear enrichment facilities.
Israel’s strikes on Iran have killed at least 865 people and wounded 3,396 others, according to the Washington-based group Human Rights Activists. The group said of those killed, 365 were civilians and 215 were security force personnel.
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