Sir Jon Cunliffe, Deputy Governor of the Bank of England shared Thoughts on cryptocurrency regulation and decentralized finance (DeFi) in a talk on Nov. 21. Cunliffe said at a conference in Coventry that he was going to talk about stablecoins and central bank digital currencies (CBDCs), but FTX crashed while he was writing his presentation which also led him to some more general comments.

Cunliffe said that FTX and some other centralized crypto asset exchanges “appear to operate like conglomerates, bundling products and capabilities within a single company” without the strict controls of traditional finance. There is “some preliminary and limited evidence” that FTX’s failure spurred a shift to decentralized platforms, though he’s not comforted by this:

“It’s unclear how decentralized these platforms are truly. Behind these protocols are often companies and stakeholders that generate revenue from their operations. Also, it’s often unclear who controls the protocol’s governance in practice.”

Regulation is needed to protect consumers, preserve financial stability and encourage innovation, Cunliffe said, and:

“While the crypto world, as demonstrated by last year’s Crypto Winter and last week’s FTX implosion, is not currently large enough or interconnected enough to threaten the stability of the financial system, its ties to mainstream finance has been growing rapidly.”

The Bank of England, the Financial Conduct Authority and the U.K. Treasury are establishing a regulatory sandbox to refine “technologies pioneered and perfected in the crypto world, such as tokenization, encryption, distribution, atomic settlements and smart contracts,” bringing Benefits for the financial system.

Cunliffe cites himself comparing crypto assets to “unsafe airplanes” to demonstrate the role of regulation in innovation. Cunliffe said that cryptocurrencies “will only be developed and adopted at scale within a framework that manages the risks of existing standards.” pose an existential threat Suggest Cryptocurrencies could “collapse under the weight of their unsafe and unsound business practices,” the authors say, and financial officials should allow it to happen.

Related: BoE Policy Talk: DeFi Better Practice Good Governance Before It’s Too Late

Cunliffe said the Bank of England will publish a consultation on issuing a sterling CBDC before the end of the year. He says:

“I do want to emphasize that this work, and any future decision to introduce a digitally native pound, should not be viewed in the context of the status quo, but rather in the context of how current monetary, payments and technology trends are likely to evolve.”