The U.K.’s central bank on Thursday warned that crypto could pose a risk to markets if it continues to grow, and called for an expansion of powers to cover innovative financial assets.

The London-based regulators worry that international norms could come too late to control financial-market risks – and the Bank of England has urged U.K. banks to approach virtual assets with utmost caution.

With market capitalization worth around 0.4% of the world’s financial assets, crypto and decentralized finance (DeFi) currently poses a limited risk to financial markets. However, regulators are worried that the success of blockchain technology means that could soon change.

“If the pace of growth seen in recent years continues, and as these assets become more interconnected with the wider financial system, cryptoassets and DeFi will present financial stability risks,” according to a report published by the Bank of England’s Financial Policy Committee, which is responsible for monitoring stability risks.

“Enhanced regulatory and law enforcement frameworks are needed, both domestically and at a global level,” the report added. It also called on other regulators to ensure that markets do not overheat, stop financial firms from taking unnecessary risk, and curb scams and market abuse, in cases where crypto mirrors classic financial assets like loans or stocks.

Bank of England governor, Andrew Bailey, on Wednesday called for “high levels” of international collaboration to stop decentralized finance spiraling out of the authorities’ control. Bailey added that this will take time, and in the meantime U.K. watch dogs appear worried about loopholes in the system.

“There is currently scope for regulatory arbitrage, and there is a danger that risks grow rapidly before an internationally agreed framework is in place,” the FPC said.

Global standard-setters the Basel Committee on Banking Supervision are due to set rules that would tell banks how careful they need to be when investing in crypto, but appear to be dragging their feet – after a first draft met a slew of opposition from financial institutions that said they were being far too cautious.

Sam Woods, the CEO of the Prudential Regulation Authority (PRA), which is responsible for checking the books of individual banks and insurers in the U.K., said in a letter dated Thursday that the PRA is also planning to vet individual crypto exposures in a survey that will take place this year.

“Many of these markets are new and untested,” Woods said, referring to the “extreme volatility and/or limited price history of these [crypto] assets.”

In most cases, banks would have to deduct any digital asset holdings from their capital, as well as plan for specific extra risks like fraud or cyber attacks, he said. This means that, unlike conventional financial assets like mortgages, a banks’ store of crypto cannot be used to vouch for further lending, Woods added.

That warning was echoed by the Financial Conduct Authority (FCA), responsible for probing cases of misselling in conventional finance. Firms should be clear and honest with their clients when selling cryptoassets, even though they technically don’t count as financial products and so lie outside the FCA’s remit, the regulator said on Thursday.