According to the Financial Stability Board (FSB), cryptocurrencies do not represent a risk to global financial stability; this was stated amidst the recent odd behavior of the market and rumblings that the crypto universe is about to collapse.
A report published by the FSB on Wednesday, October 10, noted that the financial community, led by central banks and high-ranked officials, did not think that blockchain-based digital tokens can significantly alter the global economic landscape.
The conclusions of the paper can be summarized remarking that cryptocurrencies, according to the FSB, are not an effective means of payment, store of value or unit of account, facing critical threatening situations such as liquidity problems, market volatility, operational risks, and others.
Cryptocurrencies Account for 2 Percent of the Value of Gold
The document is titled “Crypto-asset markets: Potential channels for future financial stability implications” and made the news almost immediately after its publication on the Internet. Bankers and people working in the financial industry do not see any dangers in cryptocurrencies given that their total market cap peaked at $830 billion and went down to the $210 billion today. That number, according to the report, is 2% of the gold’s value these days.
Nevertheless, the FSB does advise current regulators to monitor the latest trends on the crypto market because of their use and implementation; if not the market cap itself, has experienced a fast growth rate.
Beware of Market and Price Manipulations
Additionally, the FSB warns people about the possibility of price ‘corruption’ regarding cryptocurrencies, saying that elements such as illiquidity, a fragmented market structure, concentrated ownership, and other situations “make crypto assets potentially susceptible to price manipulation.” The organization also stated that there are several questions surrounding policy making and consumer/investor protection as well.
In July, the FSB had reported that crypto projects were in need of in-depth monitoring because the market was developing at an accelerated rate. That paper was presented to the higher ranked officials of G20, including ministers and central bank governors.
Regarding regulations within the crypto market, the International Monetary Fund (IMF) expressed a similar sentiment than that of the FSB, but back in May. The organism stressed that there are no risks about the potential impact of cryptocurrencies in the financial stability of global markets. Yet, the IMF warned that, if the growth patterns continued to increase in the digital tokens world, there could be issues if the proper regulatory framework was not in place.
A Little Bit More About the FSB
FSB stands for Financial Stability Board, which is an organization with international reach that provides recommendations regarding the global financial landscape. It monitors trends and developments, too.
The FSB was founded in 2009, after the G20 London Summit, and it successfully succeeded the Financial Stability Forum (FSF.) The FSB has its headquarters in Basel, Switzerland.
The FSB is formed by 68 local financial institutions. Among them are central banks, watchdogs, and ministries of finance. Mark Carney is the Chairman, and Dietrich Domanski is the Secretary General.
By: Andrés Chávez
