The Financial Policy Committee (FPC) of the Bank of England (BoE) does not consider the cryptocurrency market a significant threat to the economy. Its experts point out that the digital asset industry is indeed growing at a tremendous rate, but for now, financial regulators only need to monitor Bitcoin and altcoins. In other words, serious bans of the type we have seen in China are not expected in the near future. Here are the details of the situation.

Who won’t ban crypto

Here’s a quote from FPC representatives about the Committee’s attitude to the crypto market, in which they shared their attitude to what’s going on. Decrypt cites the quote.

The crypto-asset market continues to grow rapidly, but at the moment poses only limited risk to the financial stability of the UK. Regulation of the space must be developed at the same speed and on a global level to offset the potential damage from risks in the future.

There are no bans yet, but members of the Financial Policy Committee still recommend large financial institutions to be very careful if they want to deal with crypto.

The Financial Policy Committee believes that financial institutions should exercise caution and prudence with respect to any use of these assets.

While financial regulators around the world view Bitcoin with suspicion, some politicians have openly declared their support for the cryptocurrency. One of the most notable examples was El Salvador’s President Nayib Buquelet, who led the country for months in a row to accept BTC as a means of payment at the national level.

Another politician with a positive attitude toward crypto is U.S. Senator Cynthia Lummis, a Republican Party representative from Wyoming. According to a periodic transaction report filed with the U.S. Securities and Exchange Commission (SEC) on Thursday, Lummis bought between $50,001 and $100,000 worth of BTC on Aug. 16, 2021. The purchase was made through the brokerage platform River Financial, with the cryptocurrency valued at $47,000 that day, meaning the politician purchased more than one BTC.

The majority of Salvadorans oppose the adoption of Bitcoin in the country

As a reminder, U.S. senators and senior staffers with incomes above $119,554 per year are required to disclose certain financial transactions. This requirement includes “any purchase, sale or exchange of any stock, bond, commodity futures and other securities if the amount of the transaction exceeds $1,000.”

In Lummis’ case, the BTC deal is fairly expected – the senator has been an active supporter of the crypto-asset for several years. Speaking at a Blockchain Stampede event in Wyoming in September 2020, she said she bought her first bitcoins in 2013, when the cryptocurrency was trading at $330. Here’s her quote, published by news portal Decrypt.

I bought my first bitcoin in 2013 because I believe in the economic power of scarcity and the potential of cryptocurrency to eliminate some of the manipulation in our financial system.

Overall, cryptocurrency does help investment portfolios achieve better returns, and placing some of it in digital assets has a positive effect on its returns. This idea was confirmed by researchers from Iconic Funds and Cryptology Asset Group. According to the experts, even the high volatility and risks of cryptocurrencies can be counterbalanced by the overall profitability of investments over the long haul.

The study, titled “Cryptocurrencies and the Sharpe Ratio of Traditional Investment Models,” examined changes in the risk and return profile of several investment portfolio formation techniques due to the addition of cryptocurrency assets. This study of risk and return was conducted by measuring changes in the Sharpe Ratio, a measure of the excess return derived from holding a volatile asset.

Because cryptocurrencies are supposedly an asset class independent of all other markets, the risk-reward ratio of investment portfolios should improve with their addition, despite the obvious high volatility.

The results of the study are displayed more clearly below. The table lists the following traditional investment portfolios: 50/50 stocks/bonds, 80/20 stocks/bonds, balanced portfolios, special funds, pension funds and family office models. The second column of the table shows the portfolio reference returns, while the other three columns show their potential returns with rebalanced 1, 3 and 5 percent stakes in cryptocurrencies, respectively.

As you can see, buying digital assets even in a relatively small percentage of total capital can significantly increase investment returns. At the same time, due to the presence of traditional assets in the set of investments, the risks from a potential fall of the crypto market are significantly reduced.

Experts have concluded that the higher the share of crypto in a portfolio, the higher its potential return. However, the risk of losing investments also increases significantly, so investing everything in digital assets is very dangerous.Bitcoin and the economy

It looks like cryptocurrency will continue its massive conquest of the world for now, with officials seemingly not planning to interfere with it. This means that experts expect new coin records from the final quarter of 2021 for a reason. At least for the time being, this is where things are headed.