Mark Carney, the chair of the Financial Stability Board (FSB) wrote in a letter targeted to the central bank governors and finance ministers that cryptocurrencies don’t pose a risk to global financial stability.
“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,” said Carney, who is also the Governor of the Bank of England.
Carney also pointed out that even considering peak prices during December of last year, the combined value of the digital currencies fails to cross even one percent of global GDP. He further adds, “In comparison, just prior to the global financial crisis, the notional value of credit default swaps was 100 percent 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.”
It is evident from Carney’s argument that if cryptocurrencies manage to establish itself as a widely used alternative for financial transactions or becomes linked into the financial system, then its impact will be significant. But as of now, the current unstable nature of digital currencies, as well as all the security-related concerns that follow, stops it from getting a wider adoption.
In reflection to this problem, Carney points out that authorities should “regulate elements of the crypto-asset ecosystem,” to stop illegal activities, promote market integrity, and protect the financial system.
Carney has always been a supporter of blockchains, the underlying technology behind cryptocurrencies and believed in its potential to revolutionize the effectiveness and efficiency of the financial system as well as the economy. He also said that the cryptocurrency market should be held to the same standards as the traditional financial system.