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October 10, 2018

FSB published a report that examines the potential implications of crypto-assets for financial stability. The report examines the primary risks in crypto-asset markets, transmission channels affecting financial stability, and regulatory actions that have been taken and are under active consideration by authorities in different FSB member jurisdictions.

The FSB assessment includes consideration of the primary risks present in crypto-asset markets such as low liquidity, the use of leverage, market risks from volatility, and operational risks. Based on these features, crypto-assets lack the key attributes of sovereign currencies and do not serve as a common means of payment, a stable store of value, or a mainstream unit of account. In the future, should the use of crypto-assets continue to evolve, it could have implications for financial stability. These implications may include confidence effects and reputational risks to financial institutions and their regulators; risks arising from direct or indirect exposures of financial institutions; risks arising if crypto-assets become widely used in payments and settlement; and risks from market capitalization and wealth effects. 

The analysis reveals that FSB members have, to date, taken a wide variety of domestic supervisory, regulatory, and enforcement actions related to crypto-assets. These actions are balanced between preserving the benefits of innovation and containing various risks, especially those for consumer and investor protection and market integrity.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 that they rely on to enhance the efficiency of the financial system. After assessing the available information, FSB has concluded that crypto-assets do not pose a material risk to global financial stability at this time.

However, crypto-assets raise several broader policy issues and require vigilant monitoring, in light of the speed of market developments. This report sets out the reasoning behind this view and describes the FSB framework for monitoring potential financial stability risks from crypto-assets. In light of the speed of developments and the existence of data gaps, FSB has committed to monitoring the risks to financial stability on an ongoing basis, via a framework developed jointly with CPMI. The framework includes risk metrics that are most likely to highlight risks to financial stability, using data from public sources where available. Supervisory data pertaining to crypto-assets are potentially more reliable and could complement data from public sources. Annex 1 to this report sets out the metrics that FSB will collect initially. Metrics focus on the transmission channels identified in this report. The report also summarizes the ongoing work in this area by the international standard-setting bodies.

 

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Keywords: International, Banking, Securities, Fintech, Crypto-Assets, Financial Stability, FSB

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