The Financial Stability Board (FSB) has published a report outlining its monitoring framework for the financial stability implications of global crypto-asset markets.
The report says that while the FSB does not consider crypto-asset markets to pose material risk of global financial stability, “supported vigilant monitoring in light of the speed of developments and data gaps” is necessary nonetheless.
In collaboration with the Committee on Payments and Market Infrastructures (CPMI), the FSB framework focuses on the transmission channels from crypto-asset markets.
“The objective of the framework is to identify any emerging financial stability concerns in a timely manner,” the FSB says in its report. “To this end, it includes risk metrics that are most likely to highlight such risks, using data from public sources where available. Supervisory data pertaining to crypto-assets are potentially more reliable and could complement data from public sources.”
The FSB’s framework includes a number of risk metrics that could impact financial stability, including trading volumes, pricing, clearing and margining for crypto-asset derivatives, as well as harder to measure metric such as confidence in the markets and the use of crypto-asset markets for payment or settlement.
However, the FSB also notes the complications of analysing crypto-asset market data, such as the lack of transparency concerning Initial Coin Offerings (ICOIs), unreliable data sources and the fragmented nature of crypto-asset markets.
“The crypto-asset market is rapidly evolving, as are public data sources. The treatment and characterisation of crypto-assets may vary across jurisdictions or may not yet have been clarified. Given that the proposed monitoring metrics are mainly based on public data, it should be stressed that the quality of the underlying data can vary, and might not always be satisfactory.”
The role of central banks will also play a pivotal role in the development of global crypto-asset markets, and the report recognises that central banks are currently reviewing the use of new technologies that underpin the use of digital currencies and central bank operated payment systems.
“However, responding directly to the challenge with a central bank digital currency (CBDC) would be an entry into uncharted territory,” the report concludes.