Crypto Exchange Tokens Pose ‘Extreme’ Risk, BOE’s Cunliffe Says
- UK regulator decries exchanges using own tokens as collateral
- DeFi has yet to prove it can effectively handle risk
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Exchange-issued crypto tokens such as bankrupt FTX Group’s FTT can pose “extreme” risks when accepted by their issuers as collateral, Bank of England Deputy Governor Sir Jon Cunliffe said.
“A firm accepting its own unbacked cryptoasset as collateral for loans and margin payments, as there are indications may have happened with FTX, creates extreme ‘wrong-way’ risk -- i.e. when the exposure to a counterparty increases together with the risk of the counterparty’s default,” Cunliffe said in a speech on Monday.