chaintimes.com
According to the Reuters report, risks from the $2.6 trillion crypto market could grow quickly, and regulators need pre-prepared measures to bring the sector to heel, the Financial Stability Board (FSB), a risk monitoring watchdog for the G20 economies, said on Wednesday. Financial regulators across countries are working on crypto regulations actively.
“Investors don’t fully understand what they are buying.”
While cryptocurrencies like bitcoin remain a small part of the financial system, data gaps make it difficult to assess their full use, and many investors don’t fully understand what they are buying, the FSB said. In its report, the FSB said that traditional finance such as big banks and hedge funds are also becoming more involved, along with derivatives that reference crypto assets in complex investment strategies. As such, financial stability risks could rapidly escalate, underscoring the need for timely and pre-emptive evaluation of possible policy responses, the report said in a hardening of earlier FSB statements that saw crypto as posing little threat.
“Crypto market could have implications for global financial stability.”
“If the current trajectory of growth in scale and interconnectedness of crypto-assets to these institutions were to continue, this could have implications for global financial stability,” the FSB said in its report. Regulators worry increasingly about how a meltdown in crypto assets – markets that are highly volatile and still opaque – would feed through into the wider financial sector. Last May, a sharp plunge for bitcoin and ether after China tightened curbs on crypto saw yields on benchmark U.S. and German government bonds fall as investors dumped digital tokens for perceived safe-haven assets.