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Financial Authority of the G20 Says the Cryptocurrencies do not Pose a Threat for the Global Financial Stability

Mark Carney, the Governor of the Bank of England and the Chair of the Financial Stability Board (FSB), said the cryptocurrencies do not represent a threat for the global financial stability at the moment. This statement was published in a letter Carney sent to the ministers of finance and the directors of central banks of the G20. The G20 meeting in Buenos Aires starts today.

The Financial Stability Board (FSB) is an organization whose goal is to coordinate the regulatory frames related to the financial sector in the countries member of the G20. Mark Carney also mentioned in the letter that more international coordination was required to speed up the regulatory processes in order to keep track with the rapidly growing and developing cryptocurrency market.

Nevertheless, the cryptocurrency market is still relatively small and represents less than 1% of the global GDP. This is why Carney thinks it is better to revise the existing regulations instead of trying to create new regulations focused especially on the cryptocurrencies.

Mark Carney said in his letter: “The FSB’s initial assessment is that crypto-assets do not pose risks to global financial stability at this time. This is in part because they are small relative to the financial system. Even at their recent peak, their combined global market value was less than 1% of global GDP. In comparison, just prior to the global financial crisis, the notional value of credit default swaps was 100% of global GDP. Their small size, and the fact that they are not substitutes for currency and with very limited use for real economy and financial transactions, has meant the linkages to the rest of the financial system are limited. The market continues to evolve rapidly, however, and this initial assessment could change if crypto-assets were to become significantly more widely used or interconnected with the core of the regulated financial system. For example, wider use and greater interconnectedness could, if it occurred without material improvements in conduct, market integrity and cyber resilience, pose financial stability risks through confidence effects. The FSB will identify metrics for enhanced monitoring of the financial stability risks posed by crypto-assets and update the G20 as appropriate.”

This stance represents a different opinion of Mike Carney when it comes to the cryptocurrencies. At the beginning of March, the Chair of the FSB said the digital assets should abandon the anarchy and adapt to the standards of the rest of the financial markets.

Just before the G20 meeting in Buenos Aires, an NGO called Bitcoin Argentina published a statement in which it expressed the positive aspects it would support when it comes to regulating the cryptocurrency sector. The same NGO organized a gathering in Buenos Aires yesterday in order to spread its points of view among the citizens.

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