Proac­tive checks on crypto risks needed, global watch­dog FSB says

Daily Mirror (Sri Lanka) - - BUSINESS -

LON­DON (Reuters) - Reg­u­la­tors need to step up risk as­sess­ments of the cryp­tocur­rency sec­tor as cur­rent rules are patchy, and quick tech­no­log­i­cal change may lead to gaps in poli­cies on dig­i­tal money, the global fi­nan­cial sta­bil­ity watch­dog said.

They should work to fore­see risks in the emerg­ing in­dus­try that could im­pact fi­nan­cial sta­bil­ity, the Fi­nan­cial Sta­bil­ity Board (FSB) said yes­ter­day in a re­port for G20 fi­nance min­is­ters and cen­tral bank gov­er­nors.

An as­sess­ment of banks’ and other fi­nan­cial firms’ ex­po­sure to dig­i­tal money was one po­ten­tial tool, the FSB said, adding that dig­i­tal coins did not cur­rently present a ma­te­rial sta­bil­ity risk.

Though global bod­ies in­clud­ing the Or­gan­i­sa­tion for Eco­nomic Co-op­er­a­tion and Devel­op­ment and the Basel Com­mit­tee on Bank­ing Su­per­vi­sion are look­ing at cryp­tocur­ren­cies and in­vestor pro­tec­tion, fi­nan­cial sta­bil­ity and money laun­der­ing, rules vary across ju­ris­dic­tions, the FSB said.

In their first decade, cryp­tocur­ren­cies have caused headaches for global and na­tional pol­i­cy­mak­ers.

Bit­coin mus­cled its way onto reg­u­la­tors’ radars in 2017, when fren­zied re­tail buy­ing saw it ap­proach $20,000. But last year the bub­ble burst, and it lost three­quar­ters of its value, un­der­scor­ing its volatil­ity.reg­u­la­tors’ ap­proaches have var­ied from a near-to­tal ban in China to Ja­pan’s ef­forts to li­cense cryp­tocur­rency ex­changes. Oth­ers, in­clud­ing the United States and Bri­tain, are still work­ing out their re­sponse.

The Switzer­land-based FSB said cryp­toas­sets - a term that in­cludes bit­coin and No.2 dig­i­tal coin ethereum - at times fall out­side the scope of mar­ket or pay­ments watch­dogs, partly be­cause of the lack of global stan­dards.

Fur­ther­more, quick tech­no­log­i­cal change meant the “risks as­so­ci­ated with cryp­toas­set mar­kets and the level of sig­nif­i­cance of po­ten­tial reg­u­la­tory gaps will keep evolv­ing.”

Views among mem­bers - na­tional au­thor­i­ties re­spon­si­ble for fi­nan­cial sta­bil­ity and other bod­ies - vary on whether more in­ter­na­tional co­or­di­na­tion is needed, it added.

This year, bit­coin has surged by around 125 per­cent, and yes­ter­day was trad­ing around US$8,300. Its 2019 rally has been punc­tu­ated by dou­ble-digit price swings rem­i­nis­cent of 2017.

With the rise has come re­newed in­ter­est from risk-tol­er­ant in­vestors. Ma­jor fi­nan­cial firms in­clud­ing Fi­delity In­ter­na­tional have also moved to of­fer cryp­tocur­rency-re­lated ser­vices.

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