The Bank of England's deputy governor Jon Cunliffe has likened the current crypto market crash to the dot-com crash of the late 1990s—and suggested that the survivors could evolve into the "Amazons and eBays" of tomorrow.
"The analogy for me is the dot-com boom when $5 trillion was wiped off values," Cunliffe said during the Point Zero Forum in Zurich on Wednesday, as reported by Bloomberg. "A lot of companies went, but the technology didn’t go away."
He added that a decade later, "Those that survived—the Amazons and the eBays—turned out to be the dominant players," he said.
The Deputy Governor added that no matter what happens to cryptocurrencies in the coming months, he expects "crypto technology and finance to continue. It has the possibility of huge efficiencies and changes in market structure."
The Bank of England's crypto plans
Cunliffe also discussed the Bank of England's current thinking around stablecoins and central bank digital currencies (CBDCs). In April 2021, the Bank of England launched a task force to explore the potential of a CBDC. Cunliffe said that one issue being investigated is whether to create an independent CBDC with an "on or off ramp to fiat," or "something that is flexible enough" to be used in private stablecoins.
"The question is, are you better off having private stablecoins to be more optimized in certain areas, which then link back to a central bank ledger in some way? Or should we provide the base?" Cunliffe said.
Earlier this year, the Bank of England announced that it would intervene to oversee collapsing stablecoins in the event that an issuer "reached systemic scale fail." It followed comments from Bank of England governor Andrew Bailey in June 2021 that stablecoins should be regulated in the same way as payments handled by banks.
Crypto markets in turmoil
Bitcoin, the world’s largest cryptocurrency, lost about 70% of its value since it peaked at almost $70,000 last November, and is currently changing hands at $20,720, per CoinMarketCap.
The cumulative market capitalization of all digital assets, which once approached $3 trillion, has diminished dramatically in the past eight months too, slipping below the $1 trillion mark earlier in June amid the collapse of the Terra ecosystem and a liquidity crisis among several large crypto firms.
The crash has sent shockwaves throughout the crypto industry, with many companies moving to reduce their headcount or otherwise cut expenses.
The worsening business climate has also seen the valuation of many established crypto companies slide.
For example, crypto exchange Coinbase, one the crypto industry’s largest players, had a market capitalization of almost $90 billion in November 2021. Since then, the company’s valuation has plummeted more than fourfold to $13.59 billion as of today, according to data from Companiesmarketcap.
Cunliffe is the latest high-profile person to offer his take on how the latest developments in the crypto space will affect crypto businesses.
Mark Cuban, the billionaire owner of the Dallas Mavericks and investor in several crypto projects, recently joined the discussion as well, saying that “companies that were sustained by cheap, easy money—but didn’t have valid business prospects—will disappear.”