The G20 FSB Comes To Middle Ground – Monitor, Not Ban

The G20 Financial Stability Board (FSB) released a report on Wednesday, October 10, unveiling its study of the cryptocurrency market. The FSB comprises of a consortium of 68 central banks and finance departments from G20 economies.

Mark Carney, governor of the Bank of England, currently chairs its board. On several occasions, Carney has also voiced his concerns on digital currencies.

FSB Concludes that Cryptocurrencies Do Not Threaten Global Financial Stability

In its recent findings, the FSB concludes that cryptocurrencies still don’t pose any threat to global financial stability. However, it stresses the need for having a strict vigilance and monitoring of the cryptocurrency market. The summarized view of the report is as below:

“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.”

Furthermore, all the FSB observations arrive by viewing cryptocurrencies as a store of value, means of payment, and unit of account. The report also notes that digital currencies still face issues with low liquidity, high volatility, operational risks, and other problems. The FSB says that digital currencies lack sovereign currency “attributes.”

Furthermore, the report encapsulates a wide range of risks like reputational risks to regulators and financial institutions, alongside confidence effects. It also considers the direct and indirect exposure of financial institutions.

Considering the Future Growth of Crypto Assets

Additionally, the FSB cites some future prospects. Most noteworthy, if the crypto-assets enter the mainstream payments and settlements markets. Thus, it considers risks emerging from wealth effects and market capitalization.

The report notes that crypto’s growing dominance can impact financial stability and affect growing confidence. The FSB says that there needs to be a right balance between innovation and threats. Below is an excerpt from the report:

“FSB members have to date taken a wide variety of domestic supervisory, regulatory, and enforcement actions related to crypto-assets. 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. These actions are balanced between preserving the benefits of innovation and containing various risks, especially those for consumer and investor protection and market integrity.”

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