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Bank of England's Bailey says crypto is the 'new frontline' for scams

crypto
Bailey accused some crypto users of acting as though naional rules don't apply to them. Photo: Omar Marques/SOPA Images/LightRocket via Getty (SOPA Images via Getty Images)

Bank of England (BoE) governor Andrew Bailey has said that cryptocurrencies are the new "front line" in criminal scams that financial regulators are trying to prevent.

Bailey, speaking at a "Stop Scams" conference organised by the UK central bank, said the underlying tech of crypto was contributing to innovation in financial services, but also created an "opportunity for the downright criminal".

"You only have to ask the question: What do people committing ransom attacks usually demand payment in? The answer is crypto," Bailey said.

It comes after Britain's city watchdog last week extended a deadline for approving crypto businesses, giving a dozen firms more time to get their applications in order. So far, 33 firms have been approved by the watchdog, allowing them to continue providing crypto services from within the UK after 1 April.

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The Financial Conduct Authority (FCA) said firms on its temporary register of cryptoasset businesses will be given additional time if they can show they require it. Companies can do this by providing more information for their application, pursuing an appeal against the FCA’s decision or winding down their operations.

Read more: FCA extends crypto registration deadline for some firms

However, despite the extension, the cryptocurrency industry has warned that UK's fintech market faces a cryptocurrency exodus as more than 60 firms were rejected or withdrew their application to the FCA.

This risks firms moving their operations abroad if they can't gain regulatory approval by meeting strict anti-money laundering rules. Those that choose to relocate outside Britain will mostly be free to keep serving their UK customers from offshore.

But, Bailey accused some crypto users of acting as though they can disregard national rules and aren't cooperating on sanctions against Russia.

"Some crypto enthusiasts say they shouldn't be covered by Russian sanctions because that's not their world. I'm sorry, it is your world. We're all in the same world," he said.

Watch: What are the risks of investing in cryptocurrency?

The governor urged banks, tech companies, and government institutions to work with the BoE to tackle scams against consumers, which he acknowledged was a job that "will never be done".

The crypto market, now worth $2.1tn (£1.6tn) is larger than the $1.2tn market of sub-prime mortgages that triggered the global financial crash in 2008.

Bitcoin (BTC-USD) and the world's second largest crypto by market cap etheruem (ETH-USD) were down 0.6% to $46,070 and 0.7% to $3,464 respectively on Monday.

Meanwhile, the Treasury announced on Monday that chancellor Rishi sunak has asked the Royal Mint to create a non-fungible token (NFT), which is to be issued by this Summer.

It said the NFT was part of its forward approach to cryptocurrencies.

Britain has set out a "detailed plan" to exploit the potential of cryptoassets and their underlying blockchain technology to help consumers make payments more efficiently.

As part of creating a global cryptoasset hub, City minister John Glen said the UK will make it legal to bring some stablecoins under the regulatory umbrella. Glenn added the government will consult on creating regulations for a wider set of cryptoasset activities later in 2022.

Stablecoins are a class of cryptocurrencies that attempt to peg their market value to some external reference such as the US dollar or a commodity's price like gold to offer price stability.

Watch: What are NFTs?