And this brings me to my final lesson – that innovation and regulation are, in the end, friends not enemies. As I said earlier, the initial use cases for the technologies developed in the crypto world, such as speculative crypto assets, may have a limited future. But we can see that a range of other use cases are being proposed and developed in both the crypto and the non-crypto world. On the retail side, while Libra/Diem, the most high profile proposal for stablecoins for retail payments, including cross border, has withdrawn, a number fintechs and established firms are exploring the potential for technology in this area. Similar exploration around tokenisation and DLT is happening in the area of wholesale payments. A separate but rapidly developing field is the deployment of crypto technologies and smart contracts in the exchange, clearing and settlement of financial securities. Today, in mainstream finance these activities are carried out in sequence by separate entities at significant cost. However, some of the protocols that have begun to be developed in the crypto world have pointed to the possibility of collapsing these activities into a single entity and automating through the use of smart contracts. If successfully developed, such technologies could simplify the network of relationships that need  Page 8  to be maintained for trading in shares and bonds and lead to lower costs, greater speed and greater transparency for end investors.
Page 1  Some lessons from the Crypto Winter − speech by Sir Jon Cunliffe Given at British High Commission, Singapore  Page 2  Published on 12 July 2022  Jon Cunliffe sets out what he thinks are the lessons from the recent instability and losses in crypto markets – also called the ‘crypto winter’. He discusses how: • technology cannot remove all financial risks • regulators should continue and speed up their work • future regulation should be designed on the principle of ‘same risk, same regulation’ • appropriate regulation will support innovation  Speech In recent months we have seen a dramatic bout of instability and losses in crypto markets – dubbed by some commentators as the ‘crypto-winter’. A widespread collapse of crypto-asset valuations has cascaded through the crypto ecosystem and generated a number of high-profile firm failures. The totemic indicator of the crypto winter is that Bitcoin, the signature crypto asset, has lost 70% of its value since November. Regulators, of course, have not been slow to comment. And, true to type, I want today to pull out four lessons I think we can draw from this episode: Technology does not change the underlying risks in economics and finance; Regulators should continue and accelerate their work to put in place effective regulation of the use of crypto technologies in finance; This regulation should be constructed on the iron principle of ‘same risk, same regulatory outcome’ ; Crypto – technologies offer the prospect of substantive innovation and improvement in finance.