Crypto market too small to be a financial stability risk says Germany
Germany’s Financial Stability Committee had concluded that the cryptocurrency sector is too small to pose a systemic threat to the country’s financial system and capital markets.
While it noted the high volatility in price action in the cryptocurrency market, the committee noted that it lacked wide acceptance due to the transaction costs.
It added: “As the sector is still small and banks, insurers, and funds are barely involved, the stability implications of crypto-tokens have been limited so far, despite high price volatility and sharply increased market capitalisation.”
Indeed, it is getting smaller. According to data from CoinMarketCap, the current market capitalisation of digital currencies traded on global exchanges is $237.3bn. Little more than five months ago, at its price peak of near $20,000, the market cap of bitcoin alone was nearly $300bn.
The committee referred to “crypto-tokens” throughout the report, refusing to use the term currency as digital tokens did not fulfil the three functions of money as it sees them: a means of payment in everyday life, a store of value and a unit of calculation.
Although the committee saw crypto-assets as no immediate threat to the financial system, it said it would continue to monitor the sector – particularly should exchange traded derivates rise in popularity.