Cryptoassets increase risk in developing economies, study says

Cryptoassets, peddled as the future of finance, have not only failed to deliver on their promise but are themselves adding to financial risks in developing economies, according to a paper from the Bank for International Settlements.

“Cryptoassets hold out the illusory appeal of being a simple and quick solution for financial challenges” especially in emerging markets, but “have so far not reduced but rather amplified the financial risks in less developed economies,” the BIS report showed.

The report looks at what would happen if crypto and traditional financial markets become more integrated in the future, with a focus on possible financial stability risks as cryptoassets “should be assessed from a risk and regulatory perspective like all other assets.”

The risks are multi-fold, with cryptoasset vulnerabilities stemming from the nature, structure, composition and function of those markets.

As a potential way forward, the paper argues, national authorities can cooperate to define the data they need to monitor the market effectively, “with an emphasis on the identification of critical connections points with financial institutions and core market infrastructures.”

However this comes with disclosure elements that go against the anonymity that drives some people and entities to crypto assets in the first place.

The report’s guidelines for regulating and supervising cryptoasset markets include bans, containment and regulation.

This report’s information was first seen on ZAWYA; to read more, click this link.