The six good reasons to be afraid of cryptos. The experts of the Bank for International Settlements (BIS) have decided and their conclusions are final: the crypto East dangerous for international financial stability. Moreover, this is not the first time that this international financial organization has sounded the alarm, since at the start of the year it was already warning the dangers inherent in the adoption of such technologies.
These representatives of the largest central banks in the world largely prefer to decentralized cryptocurrencies, the digital currencies of central banks (MNBC) issued by them, which would be the only ones able to warn the world of an announced financial chaos. Here are the latest warnings from the Financial Stability Task Force that relate specifically to savings emerging. Get the kids out! it can be a little scary.
Bank of Banks Has Serious Concerns About Cryptocurrencies
The report we are going to cover today was written by a working group drawn from the central banks from the continent American. It includes the central bankers of Argentina, Brazil, Canada, Chile, Colombia, Mexico, Peru and the United States, under the direction of a Triumvirate made up of Andres Murcia, Anna Kovner And Alexandre Tombini. The purpose of this study was to investigate the possible dangers of the crypto market for the financial stability of emerging economies. And the 51 pages can be summed up in a single sentence from the report:
“There are serious concerns about the ability of emerging economies to control the crypto-asset market and assess risks to financial stability. »
The major problem related to cryptos would therefore be the contagion of possible turbulence in this market to the traditional economy. BRI specialists have listed six consequences probable in traditional markets that we will see together.
Each specificity of the crypto market is linked to a potential consequence on the traditional financial system, as can be seen in the animation above. First we find the price volatility on crypto which could lead to major risk in the traditional market. We then find the very structure of the crypto sector where the leverage effects important could create a lack of liquidity harmful.
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Emerging economies on the front line facing the risk of financial instability
Continuing to rotate counter-clockwise on the graph, there is the replacement of historical currencies by cryptocurrencies which could weaken the banking sector in favor of obscure international exchanges which would come to take their place.
In fourth place, the operational risks are put forward by the group of experts. They correspond to the very fragilities of the crypto sector where individuals, companies or systems could fail and this could impact the traditional sector by contagion effect.
In the same genre, the great centralization of the sector in the hands of a few players is also a potential risk of crisis. THE equity reserves issuers of stablecoins are, for example, sources of concern, because a major defect could have catastrophic consequences.
Finally, the lack of transparency of these same large platforms poses a problem for BRI experts who take a dim view of the importance assumed by these giants.
For all those who are at ease in the language of Shakespeare, the full report can be found on the institution’s website.
The document also details all the transmission mechanisms as well as the risk catalysts. And as a final warning, the authors recommend to be wary of the idea which begins to circulate and which would like that “Cryptocurrencies are a safe haven against volatile national currencies”. But as the news is sometimes capricious and as a snub to this remark, the Argentinian Bitcoin pro candidate, Javier Mileiwhich was still recently topped the polls, has just won his party’s primary. Quiet ! Don’t tell the central bankers! They would risk having nightmares.
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