The Financial Stability Board (FSB), a global coordinator of financial authorities, has published a report that sets out potential implications from crypto-assets.
The report includes an assessment of primary risks present in these assets and their markets, including low liquidity and leveraging, volatility and operational risks.
“Based on these features, crypto-assets lack the key attributes of sovereign currencies and do not serve as a common means of payment, a stable store of value or a mainstream unit of account,” says the report.
While crypto-assets don’t currently pose a material risk to global financial security, vigilant monitoring is needed because of the speed of market developments, says the report.
Potential implications as crypto-assets evolve include reputational risks to financial institutions and their regulators, risks arising if crypto-assets become widely used in payments and settlements, and risk from market capitalization.
The use of crypto-assets also raises broader policy issues, such as the need for investor protection and strong market integrity protocols. These risks are outside the report’s focus, but FSB members have already taken action related to crypto-assets, using a variety of regulatory and enforcement actions.
“National authorities and standard-setting bodies have issued warnings to investors about the risks from crypto-assets, as well as statements supporting the potential of the underlying distributed ledger technology (DLT) that they rely on to enhance the efficiency of the financial system,” says the report.
Regulatory actions are balanced between preserving the benefits of innovation and containing risk to investors and markets, the report adds.
For full details, read the FSB report.