Concern over the impacts of cryptocurrency on the UK financial system as new variants emerge

A day after the UK released its Financial Stability Report regarding the health of the UK financial system during the Covid-19 pandemic, there was talk of the impacts cryptocurrency could have.

The Bank of England explained this week how the UK financial system could be threatened by the rise in ever-growing cryptocurrency assets, with Bitcoin being a prime example of a cryptocurrency that is becoming more and more current.

At present, Bitcoin is not seen as a popular source of wealth in UK households, with around 0.1% of the wealth held in assets like these across the UK. However, there are concerns about the consequences if its value were to drop dramatically. The Bank of England must now prepare for this risk to become a reality.

It has been reported that around 2.3 million people across the UK have invested in cryptocurrency, with the average person holding £ 300. Fund managers are now puzzled as to whether they should invest in cryptocurrencies such as Bitcoin to hold a portion of their wallets as the cryptocurrency becomes more and more popular. Despite this, it can be worrying for some to know that the price can fluctuate and that it can drop sharply overnight. This is when price corrections have the ability to impact global markets.

Banks are now working to reduce the risk of this impacting them to a major level and are preparing for this eventuality. Cryptocurrencies could become the future of finance, with the impacts of the Covid-19 pandemic still widespread in the UK. While banks are still recovering from the impacts of the pandemic on their operations, they are still able to support households and prepare for further damage to the financial system as new variants of the virus continue to emerge.

The Financial Stability Report commented on the resilience of UK households despite the support measures put in place since March 2020 alongside the leave scheme. Uncertainty remains and is at the forefront of the minds of many as the Omicron variant is poised to spread, with Covid-19 still impacting the economy on a day-to-day basis.

Major UK banks are still supporting struggling households as the cost of living hit its highest rate in a decade, rising more than 4% in October alone. The bank’s policymakers are now due to announce the latest interest rate decision today, December 16.

They are questioning whether or not they should lift the emergency measures that were introduced in early 2021 to leave extra room for banks to make tough decisions about mortgages and repayment schedules, with interest rates potentially rising. by 3%. The limits on affordability can be relaxed to make it easier for applicants to access mortgages in light of current circumstances in the UK.

Most homeowners and first-time buyers reported that the hardest part of getting a mortgage is saving for a deposit, even with increased restrictions on getting a mortgage. mortgage loan from a bank or a building society.

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Don F. Davis