John Cunliffe, deputy governor of the Bank of England, has said cryptocurrencies should be regulated in the same way as traditional finance to reduce risks in the industry and increase investor confidence.
He has recalled the collapse of the Terra ecosystem during a press conference and said digital assets cannot maintain their value and stability, which causes stress in the markets.
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Cunliffe has added:
"I think for me it underlines the fact that we need now to bring in the regulatory system that will manage those risks in the crypto world in the same way that we manage them in the conventional world."
He has acknowledged cryptocurrencies have a "real potential for use in the financial system". However, he has not ruled out that the rules will have to be "tailored" to the industry because of their differences from the traditional financial system.
The Bank of England has previously recalled the importance of monitoring the market for digital assets and has called for strengthening the regulatory and compliance framework in this direction.