Global financial body says cryptocurrencies pose no ‘material risk’ on financial stability
In a report released on Wednesday, the international body comprising national financial authorities, the Financial Stability Board (FSB), said that crypto-assets currently do not pose a “material risk” to global financial stability.
The FSB said that over the course of 2018 as the market has evolved and retail investor interest has increased it has assessed the implications to financial stability.
The FSB’s new report Crypto-asset markets: Potential channels for future financial stability implications, which offers an analysis of the potential implications of crypto-assets, follows on from an earlier report published in July that outlined the work of both the FSB and other standard-setting bodies in the cryptocurrency arena.
The FSB takes a current benign view of crypto assets such as bitcoin and ethereum and concludes that while they pose no material risk to the financial system, they do raise other significant policy issues and recommends “vigilant monitoring” is required given the “speed of market developments”.
But things can change
It highlights that these markets (an estimated $830bn in January 2018 – but dropping sharply since) remain small compared to the global financial system, and crypto-assets are not yet widely used for financial transactions.
However, given the rise in interest and growth it correspondingly raises broader policy issues that fall outside of financial stability concerns that include: consumer and investor protection; strong market integrity protocols; anti-money laundering and combating the financing of terrorism (AML/CFT) regulation and supervision, including implementation of international sanctions; regulatory measures to prevent tax evasion; the need to avoid circumvention of capital controls; and concerns relating to the facilitation of illegal securities offerings.
In addition, as crypto-assets evolve, there are future implications for financial stability said the FSB and lists risk of: reputational and confidence effects to financial institutions and their regulators; direct or indirect exposures of financial institutions; rising risks should crypto-assets become more widely used in payments and settlement; and risks arising from market capitalisation and wealth effects.