Virtual currencies not a threat, says stability board
An international forum on financial regulation say virtual currencies such as bitcoin do not currently pose a threat to global stability but require "vigilant monitoring" as the market is changing rapidly.
The Financial Stability Board, FSB, added Monday that the highly volatile currencies raise concerns about consumer and investor protection and that data on banks' exposure to them remains scarce.
The board, based in Basel, Switzerland, outlined its efforts to grasp the possible impact of virtual currencies on the global banking system. That includes tracking the size of the sector to understand how widespread losses by investors could affect other activities.
The board's report was submitted to the finance ministers and central bank heads of the Group of 20 most advanced economies. The officials will meet in Buenos Aires, Argentina, on July 21-22.
The FSB's chair, Bank of England Governor Mark Carney, has said that one reason virtual currencies do not pose a threat is that the total amounts traded are small in relation to the financial system. At their peak, combined global market value was less than 1 per cent of annual world economic output.
Credit Default Swaps
By comparison, credit default swaps - the contracts that helped spread losses through the financial system during the crisis of 2007-2009 - were 100 per cent of global GDP.
One challenge in assessing risks from virtual currencies, the report said, is the scarcity of reliable data on banks' holdings of such assets.
As a result, an international forum on bank oversight, called the Basel Committee on Banking Supervision, is taking stock of banks' direct and indirect exposure to potential losses. The FSB said that could be followed by data collection on virtual currencies.