Amplified Financial Risks of Cryptocurrencies in Emerging Markets
Cryptocurrency assets have increased financial risks in less developed economies, leading powerful central banks to urge regulators to treat them like other assets. The Bank for International Settlements emphasized that novel payment solutions shouldn’t be deemed dangerous solely due to their differences. Despite being touted as a low-cost payment solution for high inflation countries, crypto assets have actually amplified financial risks in less developed economies, necessitating careful risk assessment and regulation.
The Consultative Group of Directors of Financial Stability, representing central banks from various countries, highlighted that the appeal of cryptocurrencies as a substitute for national currencies was illusory. Regulators and global institutions have been monitoring the evolving risks stemming from the cryptocurrency market, especially as its value skyrocketed and then plummeted. Emerging markets have been the key adopters of cryptocurrencies, with countries like Venezuela and Nigeria testing their potential impact on inflation-ravaged economies, albeit with increased financial stability risks.
The central banks committee emphasized that in emerging markets, the lack of financial literacy and technological knowledge, combined with weaker rule of law, could exacerbate risks to financial stability posed by crypto assets. Furthermore, they stressed the need for a more risk-based regulatory approach if crypto assets gain more traction among retail investors and strengthen ties with the traditional financial system. The increasing ownership of cryptocurrencies in countries like the UK and the US underscores the growing importance of effective regulatory frameworks in managing potential risks associated with digital assets.Essence of the Financial Times Article
The Financial Times article covers various topics related to financial markets and regulations, including cryptocurrencies. The article also mentions Laura Noonan, and provides useful links to features such as support, site tips, and the help center. This piece includes sections on managing cookies, news feed subscriptions, and tools like the FT app and digital edition. It also lists services offered such as news tips sharing, subscriptions, and advertising on the platform. Furthermore, the article showcases the FT community, live events, forums, and the Board Director Programme. It ends with information about the FT Group and mentions that market data is delayed by at least 15 minutes.
