The Financial Stability Board (FSB) assessed Bitcoin and concluded that it poses no danger to the economy of the world, though the currency ought to be monitored because its market “continues to evolve rapidly.”
The FSB is an international organization based in Basel, Switzerland; FSB pays close attention to the happenings within the global financial system and also makes recommendations when necessary. The organization came into existence in April 2009 after the G20 summit in London, taking over from the Financial Stability Forum.
The Reserve Bank of India (RBI), India’s central bank, made this observation known in a report released recently. The report stated that:
“The FSB has undertaken a review of the financial stability risks posed by the rapid growth of crypto-assets. Its initial assessment is that crypto-assets do not pose risks to global financial stability currently. The market continues to evolve rapidly, however, and this initial assessment could change if crypto-assets were to become more widely used or interconnected with the core of the regulated financial system.”
FSB Considers Crypto Volatility Worrisome
The remarks are repetitions of the report published by the FSB in October 2018, in which the group stated that cryptocurrencies could not be classified as an adequate means of payment or value storage, though it poses no threat to the world economy.
The report also stated that the volatility of cryptocurrency could be a problem to the world economy if investors lose their confidence due to its price volatility.
The analysis made on Bitcoin by the FSB can neither be described as an endorsement nor a rebuke, thereby favoring neither the crypto lovers nor haters.
Bitcoin Under Surveillance By The Federal Reserve
The assessment of the FSB only restated what Lael Brainard, the Federal Reserve governor, said. According to reports, Brainard disclosed that the Fed was closely observing the “extreme volatility” associated with the price of bitcoin, but remains confident that the financial stability of the United States faces no threat from cryptocurrency. In April 2018, Brainard said:
“One area that the Federal Reserve is monitoring is the extreme volatility evidenced by some cryptocurrencies.”
He went on to say: “For instance, bitcoin rose over 1,000 percent in 2017 and has fallen sharply in recent months. These markets may raise important investor and consumer protection issues, and some appear especially vulnerable to money-laundering concerns.”
Cryptocurrency Mostly Serves Criminals, Says Powell
While speaking to US lawmakers in July 2018, Jerome Powell, the Federal Reserve chairman, said that the usefulness of cryptocurrency could only be seen in the activities of criminals and that no intrinsic value is attached to it. Here are his words to the House Financial Services Committee:
“Cryptocurrencies are great if you’re trying to launder money or hide money, so we have to be very conscious of that. It’s not really a currency. It doesn’t really have any intrinsic value, so I think there are investor and consumer protection issues as well.”
In the two-year tenure of Donald Trump, interest rates have increased seven times, and just recently, the US stock market tanked, and Powell is being attacked from different quarters as the culprit.
In comparison, during the presidency of Barack Obama, interest rates were only raised once by the Federal Reserve.