The Financial Policy Committee (FPC) of the Bank of England (BOE) has called for the increased regulation of cryptocurrencies in a recent report.

In line with the broader reduction in risk appetite, cryptoasset valuations have fallen sharply in 2022, including the overnight plummeting of crypto coin TerraLuna in May.

The fluctuations in crypto this year have diminished investor confidence in the ability of certain so-called stablecoins to maintain their pegs, particularly those with no or riskier backing assets and lower transparency.

The committee said: “Cryptoasset valuations have fallen sharply, exposing a number of vulnerabilities within cryptoasset markets, but not posing risks to financial stability overall.”

The FPC emphasised the need for enhanced regulatory and law enforcement frameworks to address developments in cryptoasset markets and activities would likely become a necessity in the near future.

The committee said: “While crypto assets don't pose a threat to the wider financial system yet, they might in the future as they become more integrated into mainstream finance.”

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