The Financial Stability Board (FSB), an international body that monitors the global financial system to promote stability and coordinates financial regulation for G20 nations has dismissed calls from some G20 members to regulate cryptocurrencies like bitcoin.
In a letter [PPDF] sent to G20 finance ministers and central bank governors on the eve of this year’s G20 summit in Argentina, FSB chairman Mark Carney has stressed that cryptocurrencies do not represent a threat to the global financial system, following a review by the authority.
Carney, who also serves as Bank of England governor, revealed the FSB had undertaken a review of financial stability risks posed by cryptocurrencies’ “rapid growth” in response to concerns by G20 members.
He went on to state:
“The FSB’s initial assessment is that crypto-assets do not pose risks to global financial stability at this time.”
“This is in part because they are small relative to the financial system. Even at their recent peak, their combined global market value was less than 1% of global GDP,” he added. “In comparison, just prior to the global financial crisis (in 2008), the notional value of credit default swaps was 100% of global GDP.”
The FSB review determined that, for now, the relatively small usage of cryptocurrencies as fiat money substitutes and the “very limited use for real economy and financial transactions” means limited links to the wider financial system for cryptocurrencies.
This initial assessment could change, Carney added, if cryptocurrencies permeated into the core of the regulated financial system or if they gained usage as payment instruments.
The remarks come at a time when crypto-regulation is widely reported as a hot topic discussion among G20 members during this week’s meeting. The G20, an international forum of governments and central bank governors from the world’s top 20 economies. Japan, in particular, is planning on pushing its G20 counterparts to introduce measures to prevent the abuse of cryptocurrencies in money laundering, as reported previously. Financial officials from Germany and France have also jointly proposed unified regulatory guidelines for cryptocurrencies.
Despite pointing to consumer and investor concerns in cryptocurrencies and their use, or abuse, in illicit activities, Carney reminded G20 finance ministers and central bank chiefs:
“The technologies underlying them have the potential to improve the efficiency and inclusiveness of both the financial system and the economy.”
Government officials of G20 member nations are expected to hold meetings that will include discussions surrounding the regulation of cryptocurrencies on Monday and Tuesday.
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