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.
Keywords: International, Banking, Securities, Fintech, Crypto-Assets, Financial Stability, FSB
Previous ArticleFED Finalizes the Large Financial Institution Rating System
EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).
EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.
BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.
PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).
FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.
FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.
Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.
ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.
ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.