(Bloomberg) --
Global financial regulators said digital assets could soon threaten global financial stability due to their scale, structural vulnerabilities and increasing interconnectedness with the traditional financial system.
Areas of concern include the use of leverage, technological fragilities and liquidity shortages, according to a report Wednesday by the Financial Stability Board. The report also noted concerns such as low levels of investor and consumer understanding of cryptoassets, plus risks of money laundering, cyber-crime and ransomware.
The rapid evolution and international nature of such assets means authorities should consider “timely and preemptive evaluation of possible policy responses,” the report said. That includes prioritizing cross-border and cross-sectoral cooperation, including speedier information sharing in order to keep pace with crypto-asset developments.
The note of caution is an evolution from the FSB’s previous report published in 2018, which concluded at the time that cryptoassets did not “pose a material risk to global financial stability”. The FSB said then that regulators would continue to monitor the asset class on an ongoing basis given “the speed of developments and the existence of data gaps.”
The FSB is composed of representatives from authorities including the European Central Bank, Bank of England and Federal Reserve.
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