Financial Policy Committee (FPC) of Bank of England (BoE) does not consider the cryptocurrency market a significant threat to the country’s economy.
Experts note that the digital asset industry is indeed growing at a tremendous pace, but for now, financial regulators only need to monitor Bitcoin and altcoins. In other words, the serious bans that we saw in China are not expected in the near future. Here are the details.
Here is a quote from FPC representatives about the Committee’s attitude to the crypto market, in which they shared their attitude to what is happening.
The crypto asset market continues to grow rapidly, but at the moment represents only a limited risk to the financial stability of UK. Space regulation should be developed at the same speed and at the global level in order to neutralize the potential damage from risks in the future.
There are no bans yet, but members of the Financial Policy Committee still recommend that large financial institutions be extremely careful if they want to deal with crypto.
Financial Policy Committee believes that financial institutions should exercise caution and prudence in any use of these assets.
While financial regulators around the world are suspicious of Bitcoin, some politicians openly declare their support for the cryptocurrency. One of the most striking examples of this earlier was the President of Salvador ,Nayib Bukele, who for several months in a row led the country to accept BTC as a means of payment at the national level.
Another politician with a positive attitude towards crypto is US Senator Cynthia Lummis. According to a recurring trade report filed with the US Securities and Exchange Commission (SEC) on Thursday, Lammis bought BTC for between $ 50,001 and $ 100,000 on August 16, 2021.
In the case of Lummis, a BTC deal is quite expected – the senator has been an active supporter of the crypto asset for several years now.
In general, cryptocurrency really helps investment portfolios to achieve better profitability results, and placing part of it in digital assets has a positive effect on its profitability. This idea was confirmed by researchers from Iconic Funds and Cryptology Asset Group. According to experts, even the high volatility and risks of cryptocurrencies can be balanced by the overall profitability of investments over the long term.
A study titled Cryptocurrencies and the Sharpe Ratio of Traditional Investment Models examined the changes in the risk and return profile of several investment portfolio formation methods due to the addition of cryptocurrency assets. This risk and return study was conducted by measuring changes in the Sharpe ratio, a measure of the excess return earned from owning a volatile asset.
Since cryptocurrencies are supposedly an asset class independent of all other markets, the risk / reward ratio of investment portfolios should improve with their addition, despite the apparent high volatility.
The research results are shown more clearly below. The table lists the following traditional investment portfolios: 50/50 stocks / bonds, 80/20 stocks / bonds, balanced portfolio, special fund models, retirement funds, and family offices. The second column of the table shows the reference values of portfolio returns, the other three show their potential returns with the rebalancing of 1, 3, and 5 percent of the share in cryptocurrencies, respectively.
As you can see, the purchase of digital assets, even in a relatively small share of the total capital, can significantly increase the return on investment. At the same time, due to the presence of traditional assets in the set of investments, the risks from a potential fall in the crypto market are significantly reduced.
The experts concluded that the larger the share of the crypto in the portfolio, the higher its potential profitability. However, at the same time, the risk of losing investments also increases significantly, so investing everything in digital assets is very dangerous.
It seems that while the cryptocurrency continues its massive conquest of the world, and the officials do not seem to plan to interfere with this. This means that from the final quarter of 2021, the expert is waiting for new coin records, clearly not in vain. At least so far, everything is leading exactly to this.
The crypto revolution seems to have made significant strides, even if politicians are willing to capitalize on the rise in Bitcoin’s price.
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