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
Tulip Siddiq: Labour MP accuses Bangladesh’s leader of ‘orchestrated campaign’ to damage her reputation
Former minister Tulip Siddiq has accused the leader of Bangladesh of conducting an “orchestrated campaign” to damage her reputation and “interfere with UK politics”, according to a new legal letter seen by Sky News.
The Labour MP also said comments made by Professor Muhammad Yunus in a Sky News interview have prejudiced her right to a fair investigation, meaning the ongoing corruption inquiries into her should be dropped.
In March, the chief adviser – who is effectively the country’s interim leader – told Sky News that Ms Siddiq “has so many (sic) wealth left behind here” and “should be made responsible”.
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Bangladesh’s leader talks to Sky News
Bangladesh’s Anti-Corruption Commission (ACC) has opened several investigations into Ms Siddiq alleging corruption in connection with the government of her aunt Sheikh Hasina, who was ousted as the country’s prime minister last year.
In the new correspondence sent today to Professor Yunus and the ACC, lawyers for the former minister write: “The time has now come for the chief adviser and the ACC to abandon their wholly misconceived and unlawful campaign to smear Ms Siddiq’s reputation and interfere with her public service.”
Sky News has approached the chief adviser and the ACC for comment.
The Bangladeshi authorities have previously said they have evidence to back up their claims of corruption and will pursue action through the country’s courts.
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The Tulip Siddiq accusations explained
Speaking to Sky News on Monday, Ms Siddiq said: “I will not be allowing them to drag me into their world of dirty politics and nothing is going to stop me from pursuing the job that I was elected to do with an overwhelming majority, which is representing the people of Hampstead and Highgate.
“So they need to stop this political vendetta, this smear campaign, and this malicious persecution right from the beginning.”
The MP had requested a meeting with the Bangladeshi leader during an official visit to the UK earlier this month to “clear up” any misunderstandings.
But this was turned down by the chief adviser, who said he did not want to “interrupt a legal procedure”.
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In the new legal letter, lawyers for Ms Siddiq say the interim leader had already unfairly influenced the inquiries through previous comments.
“The copious briefings to the media, the failure to respond to our letters, the failure to even ask to meet with and question Ms Siddiq during their recent visit to the United Kingdom are impossible to justify and completely inconsistent with a fair, lawful and serious investigation,” reads the letter.
The correspondence also sets a deadline of 30 June 2025 for the Bangladeshi authorities to reply by, stating that “in the absence of a full and proper response… Ms Siddiq will consider this matter closed”.
A former Nobel Prize winning economist, Professor Muhammad Yunus became interim leader of Bangladesh last August after weeks of deadly protests forced Sheikh Hasina from power.
He has pledged to root out corruption and recover alleged stolen wealth before holding votes to elect a permanent administration.
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Tulip Siddiq questioned over Bangladesh corruption
Last month, Professor Yunus banned the Awami League – the political party still led by Sheikh Hasina – from standing in the coming elections.
That led to criticism from those still loyal to the former prime minister, with protests also sparking in the country over jobs, pay and planned reforms.
Earlier this year, it was revealed that Tulip Siddiq had lived in several London properties that had links back to the Awami League.
She referred herself to the prime minister’s standards adviser Sir Laurie Magnus who said he had “not identified evidence of improprieties” but added it was “regrettable” Ms Siddiq had not been more alert to the “potential reputational risks” of the ties to her aunt.
Ms Siddiq said continuing in her role would be “a distraction” for the government but insisted she had done nothing wrong.
Sheikh Hasina is currently standing trial in absentia in Dhaka over alleged killings during last summer’s civil unrest.
Asked by Sky News if she had any regrets about links to the Awami league, Ms Siddiq said: “The main thing I would say to you, I’m very proud to be the MP for Hampstead and Highgate. I was born in London, I grew up in London. I went to school here and now I’m an MP here.”
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Sheikh Hasina pictured in 2023. Pic: AP/Yomiuri Shimbun
In March, Sky News revealed that UK investigators could assist with probes into alleged grand corruption during Hasina’s time in power.
Staff from the National Crime Agency visited Bangladesh in October and November as part of initial work to support the interim government in the country.
Last month, the NCA confirmed it had secured a “freezing order” against a property in north London linked to Ms Siddiq’s family.
She denies all the allegations – and sources close to the MP say the authorities have been sending correspondence to an address in Dhaka that has no connection with her.
A “rapid” national investigation into NHS maternity services has been launched by the government.
The announcement comes after Health Secretary Wes Streeting met families who have lost babies and amid the ongoing investigations at some NHS trusts into maternity care failings.
The investigation in England is intended to provide truth to families suffering harm, as well as driving urgent improvements to care and safety, as part of efforts to ensure “no parent or baby is ever let down again”.
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The Royal College of Midwives (RCM) welcomed the government’s announcement and said maternity services were “at, or even beyond, breaking point”.
Last week, the NHS regulator said maternity and neonatal services at two Leeds hospitals had been rated inadequate over safety issues.
Mr Streeting, who was speaking at the Royal College of Obstetricians and Gynaecologists (RCOG) conference in London, apologised on behalf of the NHS for what families had been through and said it was “clear something is going wrong”.
He added: “For the past year, I have been meeting bereaved families from across the country who have lost babies or suffered serious harm during what should have been the most joyful time in their lives.
“What they have experienced is devastating – deeply painful stories of trauma, loss, and a lack of basic compassion – caused by failures in NHS maternity care that should never have happened.
“Their bravery in speaking out has made it clear: we must act – and we must act now.”
Mr Streeting said families have had to “fight for truth and justice” and had described being “ignored, gaslit, lied to, manipulated and damaged further by the inability for a trust to simply be honest with them that something has gone wrong”.
The investigation will consist of two parts.
Wes Streeting speaking during the RCOG conference. Pic: PA
The first will investigate up to 10 of the most concerning maternity and neonatal units, including Sussex, in the coming weeks to give affected families answers as quickly as possible, according to the Department of Health.
The second will be a “system-wide” look at maternity and neonatal care, uniting lessons from past inquiries to create one clear set of actions designed to improve NHS care.
A National Maternity and Neonatal Taskforce will be chaired by Mr Streeting and made up of experts and bereaved families.
The investigation will begin this summer and report back by December.
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Sir Jim Mackey, chief executive of NHS England, said: “This rapid national investigation must mark a line in the sand for maternity care – setting out one set of clear actions for NHS leaders to ensure high quality care for all.”
Dr Ranee Thakar, president of the RCOG, said: “The maternity workforce is on its knees, with many now leaving the profession.”
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RCM chief executive Gill Walton said: “Everyone involved in maternity services – the midwifery community, obstetricians, anaesthetists, sonographers and, of course, the women and families in their care – knows that maternity services are at, or even beyond, breaking point.
“This renewed focus and commitment by the health secretary to deliver change is welcome, and we will do everything we can to support him in doing so.”
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