FSB: Crypto poses no threat to financial stability

But the digital asset is still volatile and high risk so requires further monitoring, according to the FSB.

Following several months assessing the cryptocurrency market, the financial stability board (FSB) released a report this week discussing its findings.

The FSB said, “crypto-assets do not pose a material risk to global financial stability at this time”. But due to implications from the increasing number of cryptocurrencies, platforms and interest from retail investors, monitoring is required.

At the end of September, the treasury committee called for regulations to be introduced to improve confidence and reduce risk when trading crypto-assets. The FSB discussed the risks that crypto might pose following the market cap slide since January in the report released on Wednesday.

The report highlights the speed the market is developing and requires “vigilant monitoring”. Operational risks, the use of leverage, volatility, and low liquidity are the primary risks identified by the FSB.

Due to minimal data within the crypto-market, the FSB suggests additional analysis is required to help monitor the market.

The unique features cryptocurrencies possess, including the ease of transferability and anonymity, make them very attractive to those undertaking illicit activities. The FSB is concerned with the exposure to money laundering, tax evasion and terrorist financing – which it says require especially close monitoring.

Despite these significant risks, the FSB doesn’t believe crypto will have an adverse impact on global financial stability as things stand. The organisation’s concern is that the popularity of the cryptocurrencies will continue to rise without sufficient monitoring.