Bank of England Warns About DeFi and Acknowledges Financial Crisis

November 24, 2022

Darko Simunovski content is written in English. Translations into other languages are automated and there may be minor text errors.

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Yesterday, the deputy governor of the Bank of England, Jon Cunliffe, warned that decentralized finance protocols do not yet provide an effective way to manage risk. This warning was issued in a speech at the Centre Policy Forum Conference on DeFi & Digital Currencies, titled: ,,Reflections on DeFi, Digital Currencies, and Regulation”.

John Cunliffe told the audience, that DeFi’s claim that a code can manage risk instead of intermediaries is yet to be proven.

“From the perspective of a financial stability authority and a financial regulator, I have yet to be convinced that the risks inherent in finance can be managed effectively in this way,”

“Moreover, it is unclear to what extent these platforms are actually decentralized,” he added. ”Behind these protocols usually sit firms and stakeholders who derive revenue from their operations. Furthermore, it is often unclear who controls the protocol’s governance in practice”.

Cunliffe added: “The UK Treasury will also consult on how to extend investor protection, market integrity and other regulatory frameworks that cover the promotion and trading of financial products to activities and entities involving crypto assets,”

As the dystopian CBDC’s (BritCoin) are coming out in the economy, the bankers are pushing hard on new regulations, that can hurt the crypto market and misleading the public about cryptocurrencies and CBDC’s with false information and same narrative that is for our own good. The goal is more than clear, they feel threaten by the power of blockchain and the possibility of Bitcoin to provide decentralized global economy. They are pushing the agenda to stop the growth of crypto industry and to impose new financial system without public approval, in order to increase their central power and to prevent the central system from collapsing.

The central bank warned Tuesday that there was still a “material risk to UK financial stability” from a sharp-sell off in government bonds that has sent yields soaring, pushing up borrowing costs across the economy and forcing some pension funds to dump assets to raise cash. The slump in UK government bonds that promise to protect investors from inflation, known as index-linked gilts, was the latest source of risk.

“Dysfunction in this market, and the prospect of self-reinforcing ‘fire sale’ dynamics pose a material risk to UK financial stability,” was said in a statement.

The extent of the bond market strain was underscored, when the UK government sold £900 million ($994 million) of index-linked gilts due in 2051 at the highest yield since October 2008. The Bank of England will include index-linked gilts in its emergency £65 billion ($71.7 billion) bond-buying program announced on Sept. 28. The bank said the program would end as planned last week, despite calls for it to continue for another three weeks.

It is not first time Bank of England to criticize Bitcoin and other cryptocurrencies, in order to push away protentional crypto investors and to fulfill their agenda of dystopian programable money called CBDC.

Last month Bank of England acknowledged that $1 trillion in pension fund investments could’ve been wiped out without intervention, The official confirmed for the first time that worries that a popular pension fund investment would collapse prompted the intervention by the central bank to buy bonds at a time when it was planning to sell them.

Jon Cunliffe, deputy governor for financial stability, said in a letter to the Treasury Select Committee that worries around what’s called liability-driven investment is what drove the bank of England to act.

“Had the Bank not intervened on Wednesday 28 September, a large number of pooled LDI funds would have been left with negative net asset value and would have faced shortfalls in the collateral posted to banking counterparties. [Defined benefit] pension fund investments in those pooled LDI funds would be worth zero,” said Cunliffe.

Annual inflation rate in the UK jumped to 11.1% in October of 2022, from 10.1% in September and is much higher than market forecasts of 10.7%. It is the highest inflation rate since October 1981 and intents to go even higher.

Central Banks around the world are loosing the public trust, as they see cryptocurrencies as way better alternative solution to keep the value over time.

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