Personal Finance/Wealth Management

"Interconnectedness creates the possibility that shocks are transmitted through the financial system," said The Bank Of England Governor, Sir Jon Cunliffe.

How long will the global traditional financial regulators continue to ignore the crypto market is the question the Bank of England deputy governor, Sir Jon Cunliffe seems to be asking here. As you and I know, most crypto is NOT backed up with any physical assets, but only with strings of computer codes. These make them highly volatile.

As the price of Bitcoin climbed to $57,700, the Bank of England deputy governor Sir Jon Cunliffe said Cryptocurrencies need regulation as a "matter of urgency".

Although crypto does not currently pose any risk to the global financial market at the moment (as they operate under different markets), there is a reason to believe that the risk is transferable. This is what happened when the Wall Street market crashed in 1929. People who borrow using stock as collateral were forced to sell their stocks at lower rates when brokers demanded repayment. This pushed millions into bankruptcy which in turn had a ripple effect on the global financial market.

Sir Jon Cunliffe wants a situation where crypto is backed up by physical assets like gold, precious metals, and other valuable reserves. He believes these 'STABLE COINS' will make a difference should shock waves rip through the unregulated crypto market.

China is the first country that bans trading in crypto, and outlaw all crypto mining. They are not recognized in most countries, hence even the so-called gains are not taxed. But how long will this continue?

The BBC, analyzing Sir Jon Cunliffe's speech said, ''Bringing the crypto world effectively within the regulatory perimeter will help ensure that the potentially very large benefits of the application of this technology to finance can flourish in a sustainable way."

What Investment Is Left For Ordinary Folk Like You And Me?

Regulators have always warned that we should be prepared to only invest an amount we are ready to lose. Cash in saving accounts is being eaten up by inflation, and one is at greater risk if the bank fails, although most governments have a scheme where savers are compensated to a certain level.

All investments carry some degree of risk. It depends on how risk-averse are you. Investing in unregulated crypto is the highest risk you can think of, indeed what is known as speculation in the financial market. This does not mean one cannot still make money in it. It depends on your entry and exit plan.

Stocks, shares, and bonds are thought to be of moderate risk, but industries go down and some companies closed down altogether as the impact of COVID bites through. Yet, your risk averseness, entry, and exit plan do matter as well.

The property market depends on where you buy. We have seen the fall of corporate property markets as most employees now work from home, and organizations have to downsize. In property, you must know what you are doing and buying blindly at auctions and at private sales again depending on what you know or what the sellers are disclosing.

Know what you want out of any investment you embark on.

The Takeaways