The Financial Stability Board (FSB) has published a report delivered to the G20 Finance Ministers and Central Bank Governors on crypto-assets, stating that they do not pose a material risk to global financial stability at this time.

The FSB has developed a framework, in collaboration with Committee on Payments and Market Infrastructures (CPMI), to monitor the financial stability implications of developments in crypto-asset markets. The report sets out the metrics it will use to monitor these markets as part of an ongoing assessment of vulnerabilities in the financial system.

“While the FSB believes that crypto-assets do not pose a material risk to global financial stability at this time, it recognises the need for vigilant monitoring in light of the speed of market developments,” read the document.

The use of leverage, and financial institution exposures to crypto-asset markets are important metrics of transmission of crypto-asset risks to the broader financial system,” noted the FSB. The framework also includes metrics on trading volumes, pricing, clearing and margining for crypto-asset derivatives.

In a letter to G20 finance ministers and central bank governors in March, FSB chair Mark Carney said that crypto-assets raise a host of issues around consumer and investor protection, as well as their use to shield illicit activity and for money laundering and terrorist financing. However, at the same time, the technologies underlying them have the potential to improve the efficiency and inclusiveness of both the financial system and the economy.

Against this backdrop, the report also described the work standard-setting bodies are undertaking in the areas of their respective mandates:

• CPMI has conducted work on applications of distributed ledger technology, and is conducting outreach, monitoring and analysis of payment innovations.
• The International Organization of Securities Commissions has established an initial coin offering (ICO) consultation network to discuss experiences and concerns regarding ICOs, and is developing a framework to assist members in how to address domestic and cross-border issues stemming from ICOs that could impact investor protection. IOSCO is also discussing regulatory issues around crypto-asset platforms.
• The Basel Committee on Banking Supervision is assessing the materiality of banks’ direct and indirect exposures to crypto-assets, clarifying the prudential treatment of such exposures and monitoring developments related to crypto-assets for banks and supervisors.

The Financial Action Task Force will report separately to the G20 on its work concerning the money laundering and terrorist financing risks relating to crypto-assets.

Responding to the FSB statement, deVere Group chief executive Nigel Green said it proves cryptocurrencies are already part of mainstream finance.

“The FSB's conclusion follows more and more global financial institutions, major corporations and household name investors now working with cryptocurrencies and blockchain, the technology that underpins them, and as international regulation is developed further,” he commented.

He also noted that the news came as Bitcoin, the world’s largest digital currency, climbed the 50-day moving average on Monday for the first time in nearly two months, increasing in price to above $6,700.

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