BoE Director Stands Firm in His Anti-Crypto Stance Amid Market Chaos

Key Insights:

• The head of the Bank of England said that cryptos have “no intrinsic value.”
• He warned users that those who invest in these digital assets would “lose all their money.”
• The crypto market had one of its worst days yesterday, falling below $1 trillion.

The crypto market witnessed a brutal blow on Monday, alarming global authorities and raising pressure on central banks. Crypto investors and users voiced out their cries about the ongoing market downturn. One crypto investor and a YouTuber went to the extent of announcing that many people would quit crypto.

This has even instigated fear in the minds of central bank authorities, who have shown their ‘pro-crypto’ stance. For instance, U.S. Treasury secretary Janet Yellen publicly acknowledged the potential of digital currencies and blockchain technology. In a recent CBDC interview, she said crypto has “grown by leaps and bounds.”

However, the unexpected market crash driven by the collapse of the Terra network and massive selloff amid heightened inflation fears has made Yellen shift sides. Last week during an event organized by the New York Times, she warned that cryptos like bitcoin (BTC) and ether (ETH) are “very risky investments.”

Days after her warnings, the chief of the central bank of England, Andrew Bailey, said Monday that unbanked digital assets have “no intrinsic value.”

“People may still want to buy them because they have extrinsic value … people value things for personal reasons. But they don’t have intrinsic value. This morning we have seen another blow-up in a crypto exchange.”

Be prepared to lose all money

Again, the central banker emphasized that crypto assets are highly risky and speculative. In particular, people need to be alert to the risks or be prepared to lose their entire investments. 

Speaking to MPs during a Parliament session, Bailey noted,

“If you want to invest in these assets, okay, but be prepared to lose all your money.”

This isn’t the first time Bailey has voiced his anti-crypto stance. Last month, the Bank of England (BoE) Governor said that cryptos are not suitable as a practical means of payment.

Bailey has never been a fan of bitcoin or crypto. He said in April during a “Stop Scams” conference that crypto creates an “opportunity for the downright criminal.” Known for his reluctant stance on decentralized money, he has been highly skeptical since last year. He tagged cryptos as “dangerous” before expressing that these assets wouldn’t last long. 

Was he right? What exactly happened to the crypto industry?

On Monday, major trading platforms such as Celsius halted crypto withdrawals, citing “extreme market conditions.” Binance (BNB) quickly followed, pausing bitcoin withdrawals due to “stuck on-chain transaction,” but resumed it hours later.

The Celsius native token CEL dropped drastically from over $7 to about 33 cents last year. The token was down further by 50% in the previous week. The news of Celsius looked similar to what happened in May when the algorithmic stablecoin pegged to USD – TerraUSD (UST) – lost $60 billion in value.

Additionally, Peter Thiel-backed crypto lending start-up BlockFi and Crypto.com announced Monday that they would cut more than 400 jobs. They joined the growing list of digital asset firms such as Gemini and Rain Financial that are looking to layoff.

Following these, panicked investors dumped their crypto holdings, causing the market cap of overall crypto to slump below $1 trillion, which is down from $3 trillion in November 2021.

The crash dragged BTC to trade below $23,000, tumbling 15% in the last 24 hours. The largest cryptocurrency is trading at $22,419 at press time. Ethereum, too fell by 17% and now trading at $1,187.

Adding more to the Monday swirl, shares of the crypto trading behemoth Coinbase (COIN) fell 11%, which marks the lowest since the company’s public debut in April 2021.

Bailey’s repeated warning comes in response to a question during Parliament about the duty of regulators to protect investors amid the government’s wish to promote financial innovation.