The FSB ruled that crypto market data reporting requires global standards to allow for adequate risk assessment.
A new research on the financial stability risks linked with cryptocurrencies has been released by the Financial Stability Board (FSB), a worldwide financial institution funded by the Bank for International Settlements.
The 30-page report, which was released on Wednesday, covers a variety of financial hazards associated with various types of cryptocurrencies as well as business sectors, including private digital assets such as Bitcoin (BTC), stablecoins such as Tether (USDT), and decentralised finance (DeFi).
The paper mentions numerous commonly highlighted dangers, such as the probable failure of particular stablecoins, which poses a serious threat to the overall crypto ecosystem’s stability due to stablecoins’ dominant trade volumes. The FSB also warned about the dangers of rapid DeFi adoption and the resulting lack of clearly recognised intermediates, as well as the possibility of increased bank sector engagement.
The FSB also warned about the dangers of data gaps in the crypto business, citing a “lack of transparent, consistent, and credible data on crypto-asset markets and their links to the core financial system.”
“These data gaps make it difficult to estimate the full breadth of crypto assets’ use in the financial system,” the FSB noted, noting that such gaps make it harder to detect and quantify risks associated with the crypto industry.
The authority said that “data available on public blockchains is pseudonymous by design” since it’s “impossible to determine the identities of persons engaging in crypto-asset activity.”
The FSB identified a number of data gaps, including the percentage of households that have invested in crypto assets, the amount of crypto fraud, financial sector exposure, owners, the number and value of payments industry transactions, and others. “Survey-based metrics are not adjustable, and they are updated infrequently or irregularly,” according to the group.
The FSB mentioned DeFi-related data gaps such as the unknown share of retail vs institutional involvement, the number of decentralised applications on a blockchain, and leverage indicators, among other things.
“Because of the transnational nature of crypto-assets, getting a clear picture of these markets is difficult.” As a result, there may be significant discrepancies between crypto asset values supplied by different data sources,” an FSB representative informed. Crypto market data gaps, according to the authority, are mostly caused by a “lack of uniform reporting standards and regulation or compliance with the regulation.”
The FSB said it has no information on the development of global standardised crypto reporting systems.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.