Cryptocurrency assets have amplified rather than reduced financial risks in less developed economies, and regulators will need to treat them in the same way they oversee other assets, some of the world’s most powerful central banks have warned. From a report: Novel solutions to payments challenges should not be classified as ‘dangerous’ simply because they are different, the Bank for International Settlements said on Tuesday. However the global central banking body added that the appeal of crypto was “illusory,” in a paper published on approaches to regulation. The Consultative Group of Directors of Financial Stability, which includes representatives from central banks of the US, Argentina, Brazil, Canada, Chile and Mexico, said crypto had been promoted as a low-cost payment solution and substitute for national currencies in countries with high inflation or high exchange rate volatility. “However, crypto assets have so far not reduced but rather amplified the financial risks in less developed economies. Therefore, they should be assessed from a risk and regulatory perspective like all other assets,” it said in a 50-page report. Watchdogs including the IMF and the Bank for International Settlements have been charting the evolving financial stability risks from the cryptocurrency market as it ballooned from a nascent industry to one whose value peaked at $2.9tn in November 2021.
