A Bank of England Deputy Governor, Sir Jon Cunliffe, has warned that cryptocurrencies can dry up the supply of credit through the banking system, which could have “profound economic consequences.”
Per Reuters, Sir Jon Cunliffe revealed this during a speech at the London School of Economics saying that a new wave of technological developments enabling users to transact cryptocurrencies could become mainstream.
Talking about stablecoins such as Facebook’s proposed Libra cryptocurrency, Cunliffe said it’s possible these could make people move money from their bank accounts to wallets provided by other firms.
The Bank of England Deputy Governor said:
In such a world, and depending how and whether stablecoins were backed with other financial assets, the supply of credit to the real economy through the banking system could become weaker or indeed disappear. That would be a change with profound economic consequences.