Home cryptocurency Crypto and Digital Assets are Not Threats to Financial Stability – FSB

Crypto and Digital Assets are Not Threats to Financial Stability – FSB

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Digital assets

Why many are scared of cryptocurrencies and digital assets being a threat to financial stability, the Financial Stability Board (FSB) on the other hand said otherwise.

According to a report from FSB published on Wednesday, digital assets and cryptocurrencies currently pose no threat to global financial stability.

A document titled “Crypto-asset markets: Potential channels for future financial stability implications,” by the Financial Stability Board (FSB), discusses what effect, if any, the nascent asset class might have on global financial stability.

FSB is funded by the Bank of International Settlements, and in a summary has said cryptocurrencies are not an effective means of payment, store of value or unit of account. In a press release, FSB said, cryptocurrencies face issues with low liquidity, market risks from volatility and operational risks, among other concerns.
“Based on the available information, crypto-assets do not pose a material risk to global financial stability at this time. However, vigilant monitoring is needed in light of the speed of market developments. Should the use of crypto-assets continue to evolve, it could have implications for financial stability in the future.”

Risks of Cryptocurrency Usage

FSB in its report despite saying cryptocurrencies and digital assets posed no threats to financial stability, however, did not ignore the risks involved in cryptocurrency usage.

While advocating for close monitoring of crypto assets and their potential risk, the FSB notes that this is difficult, at least in part, because there is not a lot of information available on the full impact they can have.

Crypto assets have an impact outside financial stability as well, the report continues, raising question about policy issues including consumer and investor protection, market integrity, anti-money laundering and combating the financing of terrorism (AML/CFT), tax evasion, capital controls circumvention and illegal securities offerings.

It however concluded that issues including consumer and investor protection, market integrity, anti-money laundering and combating the financing of terrorism (AML/CFT), tax evasion, capital controls circumvention and illegal securities offerings, are outside its primary focus, and “are the subject of work at national and international levels.”

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