The growth of crypto assets like bitcoin is a bad sign for the global banking system, warned the Basel Committee.
The banking supervision forum said that crypto assets had become popular despite exhibiting a high degree of volatility and risk. The Committee noted that while the new financial instruments were immature, they still presented many risks for banks. They were threats related to liquidity, credit, market, operations (including fraud and cyber threats), money laundering, terrorist financing, as well as legal and reputation risks. Excerpts from the newsletter:
“While the crypto-asset market remains small relative to that of the global financial system, and banks currently have [minimal] direct exposures, the Committee is of the view that the continued growth of crypto-asset trading platforms and new [commercial] products related to crypto-assets has the potential to raise financial stability concerns and increase risks faced by banks.”
Destabilizing Established Banking System
The Basil Committee’s notice came in the wake of growing speculation around cryptocurrencies. Bitcoin activists pit the digital currency technology as a messiah against a so-called corrupt banking system. They believe a decentralized asset technology would distribute wealth more evenly and openly than a regular bank which could create money just by printing it.
Praet: As a central bank, we can create money to buy assets #AskECB https://t.co/zTQuU4y1ch
— European Central Bank (@ecb) March 12, 2019
The belief has led many to embark a
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