Cryptocurrencies Don’t Pose Risks To Financial Stability: FSB

The Financial Stability Board, an international group of central bank regulators and government ministers, says that cryptocurrencies do not threaten to global financial stability.

The observation was made by the Board in a letter published on Sunday, on the eve of the Group of Twenty (G20) finance ministers and central bank governors.

The meeting in Argentine capital Buenos Aires will focus on the policies needed to protect the global economic upswing against downside risks, and to finalize much-needed reforms to bolster growth.

Cryptocurrency is an important item on the meeting’s agenda.

Two separate discussions on cryptocurrencies are scheduled for Monday and Tuesday to seek a “common response” on regulation.

The FSB’s initial assessment is that crypto-assets do not pose risks to global financial stability
at this time, says the letter, signed by Financial Stability Board chairman Mark Carney.

Corney, who is also the Bank of England chairman, said this assessment is based on the fact that they are small relative to the financial system.

“Their small size, and the fact that they are not substitutes for currency and with very limited use for real economy and financial transactions, has meant the linkages to the rest of the financial system are limited”.

Even at their recent peak, the combined global market value of the cryptocurrencies was less than 1 percent of global GDP.

However, FSB warned that as the market continues to evolve rapidly, this initial assessment could change if
crypto-assets were more widely used or interconnected with the core of the regulated financial system.

The letter deals in detail with cryptocurrrency while discussing emerging risks faced by the global financial
system.

Responding to the concerns of members, the FSB has undertaken a review of the financial
stability risks posed by the rapid growth of crypto-assets.

FSB noted that crypto-assets raise a host of issues around consumer and investor protection. It could be used to shield illicit activity and for money laundering and terrorist financing.

On the positive side, the blockchain technology underlying the cryptocurrencies have the potential to improve the efficiency and inclusiveness of both the financial system and the economy, FSB said.

Corney called for international coordination, supported by international organizations
such as CPMI, FATF and IOSCO, to address threats posed by the digital money.

by RTT Staff Writer

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