Published on 22 July 2018

SUSTAINABLE FINANCE

Bitcoin: the Financial Stability Board prepares for cryptocurrency risks

Without being alarmist, the Financial Stability Board (FSB) is set to launch a cryptocurrency monitoring committee. Studying the volatility of these currencies, and the technologies that support them, will make it possible to better anticipate possible risks. President Emmanuel Macron has already called for bitcoin regulation in France.

Bitcoin is marked by extreme volatility. It lost more than 50% of its value in 2018.
@DR

Ahead of the G20 Meeting of Finance Ministers in Buenos Aires, the FSB, a body mandated by the G20 to carry out financial system reforms, published a report on monitoring crypto-assets, calling on countries to remain "vigilant" of their rapid growth.

"While the FSB believes that crypto-assets do not pose a material risk to global financial stability at this time, it recognizes the need for vigilant monitoring in light of the speed of market developments", explained the Basel-based institution.

According to the FSB, evaluating the size and growth of cryptocurrencies and its associated technologies is essential in assessing potential risks, especially in the event of their falling asset value.

A difficult road ahead

Implementing monitoring tools does not come without a number of challenges, acknowledged the FSB, most notably due to lack of transparency, rapid market evolution, and the potential risks involved in managing cryptocurrencies.

The FSB has therefore split this task between several committees, which are in charge of setting up analysis and monitoring tools on raising cryptocurrency capital and the direct/indirect exposure of banks to crypto-assets.

For the time being, the FSB has proposed that countries rely on data such as transaction volumes, prices, volatility and growth rates, and continue to review these data as technologies and cryptocurrency markets evolve.

Millions of euros lost in France

Other financial institutions are more concerned about virtual money, including the Bank for International Settlements (BIS), or the "bank of central banks." In its last annual economic report, it raised the question of "processing capacity (digital operations related to cryptocurrencies) stating: “Only supercomputers could keep up with verification of the incoming transactions".  The network would eventually be overwhelmed by the amount of data to be processed.

Meanwhile, President Emmanuel Marron and Bruno Le Maire have called for the regulation of these currencies, the Autorité des marchés financiers (AMF) is calling on the French to be aware of these "opportunities", denouncing "toxic investments", which were responsible for more than €9 million lost in France since the beginning of the year.

Ludovic Dupin with AFP


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