Although Bitcoin has not become a commonwealth in UK households, it has become more popular by the day. Bank governor Sir Jon Cunliffe mentioned if the value was to drop drastically, it could have a knock-on effect. He added that the Bank of England needs to be ready to handle its risks if prices drop.
He told the BBC’s Today show that cryptocurrencies are now held by roughly 0.1 percent of UK households. This is an average of 2.3 million people with about 300 euros each.
He did emphasize that crypto-currencies have been “growing very fast,”. This has led to funding managers asking whether they should keep a portion of their holdings in crypto-currencies.
In Conliffe’s words “Their price can vary quite considerably and they could theoretically or practically drop to zero.” He went on “The point, I think, at which one worries is when it becomes integrated into the financial system when a big price correction could really affect other markets and affect established financial market players.” “It’s not there yet but it takes time to design standards and regulations.” He concluded by saying “We really need to roll our sleeves up and get on with it, so that by the time this becomes a much bigger issue, we’ve actually got the regulatory framework to contain the risks.”
All this was said by Sir Jon the day after the Bank published the Financial Stability Report. This report examined the UK’s financial system. The results show that UK households have been resilient despite what the pandemic has brought with it along with various other obstacles. Uncertainty regarding health issues and the economic outlook still remained. In October, the cost of living increased by 4.2 percent. This is the largest percentage in over a decade. Analysts expect interest rates to rise from their present low of 0.1 percent as a result of the rising in inflation. However, because of the spread of the Omicron variant concerns arose. The spread of ‘Omicron’ can have a greater impact on the economy as well.
The Bank of England is back to being financially stable like before the pandemic hit. They said, “Major UK banks are strong enough to keep supporting households and businesses even in severe scenarios.”
They are considering easing emergency measures imposed at the start of the year allowing banks more leeway. Banks will have to set up an additional capital buffer of 1% of their total loans to protect against future shocks. This is what we call a countercyclical capital buffer. Next year, it will increase to 2%. The Bank is considering loosening mortgage affordability limits. It’s considering eliminating the requirement that lenders determine. Whether borrowers will still afford repayments if interest rates rise by 3% above the regular variable rate. It also stated in its analysis that collecting cash for a down payment remains a significant barrier to homeownership.