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Financial Stability Board: Digital currencies are not a risk to worldwide financial stability

Financial Stability Board: Digital currencies are not a risk to worldwide financial stability
Oct 12, 2018 by Rico Wise

Recently, the FSB presented its report, wherein the authority stated that digital currencies will not be able to harm the global stability in the financial sector. Still, the agency advised that the digital currency markets be supervised.

The report findings concentrate on evaluation of the possible effects of digital assets on the financial stability and the report in itself a continuation of an original evaluation performed previously this spring and executed in the letter of the FSB Chairperson to G20 Finance Ministers and Central Bank Governors. The report also continues the topic on the assessment of work performed by regulatory agencies with regards to digital assets, issued by the FSB earlier this summer.

The report claims that digital currencies can serve as means of payment, store of value and medium of exchange, although not being ideal. According to the findings, digital currencies also encounter numerous problems, such as low liquidity, market risks from fluctuations and operational dangers, to name a few.

As per the report, such risks may entail confidence effects and pose threat to reputation of the financial organizations and their policymakers, risks deriving from being financial institutions being either directly or indirectly exposed, risks occurring in the event that digital assets become widely utilized for payments and transactions, and risks deriving from market capitalization and wealth effects.

The report claims that in the event that digital assets keep attracting attention and accumulating popularity, such situation might influence the financial stability by impacting financier confidence. The report also sets forth the necessity for balancing innovations and threats. It refers to digital currencies as an emerging development put at the cutting edge of revolutionary inventions that could one day become a threat to the existing financial system.

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