Regulators claim Bitcoin doesn't threaten financial stability

Regulators claim Bitcoin doesn't threaten financial stability

Cryptocurrencies such as Bitcoin are not a threat to financial stability, according to the Financial Stability Board (FSB), a global regulator.

The financial stability board is chaired by Mark Carney, the governor of the Bank of England. It brings together financial regulators from around the world.

The organisation delivered a report to the finance ministers of the G20 group of countries.

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The report from the FSB stated: "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.”

The regulator added cryptocurrency raises 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.

At the same time, the FSB stated the technologies underlying cryptocurrency has the potential to improve the efficiency and inclusiveness of both the financial system and the economy.

The price of bitcoin rose to a two month high in the immediate aftermath of the publication of this report.

The token currently trades at $7,338 (£5,617), having been as high as $20,000 (£15,349) at the end of last year.

Mr Carney, in his capacity as governor of the Bank of England, has previously stated he regards bitcoin as having no practical use because it is less efficient at performing the functions of money than regular money.

He said money is a payment method, but each payment made via bitcoin is prohibitively expensive.

He said regular currencies are relatively stable because central banks can regulate the money supply to ensure this, but as there is no central producer of bitcoin the supply can vary wildly.

This means cryptocurrency is not a useful store of value, in Mr Carney’s view.

Nigel Green, chief executive of financial advice firm De Vere Group, said: “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."

In May, De Vere revealed findings of a global survey that found 35 per cent of wealthy investors will have exposure to cryptocurrencies by the end of 2018.

However Nouriel Roubini, an economist at New York University who is credited by many with having predicted the global financial crisis, is a vehement opponent of bitcoin.

He said he expects the asset to ultimately, end up having zero value.