BTC Wires: It is quite a well-known fact that trading in cryptocurrency is a high-risk affair as they are highly volatile in nature. On a global scenario, the majority of the investors are unaware of the financial rules and obligations pertaining to the trading of cryptocurrency. Perhaps, it was time for the regulatory bodies to come together and chalk out a framework to monitor the risks of crypto-assets like Ether and Bitcoin. However, they may not be a potential threat to the financial stability as of now.
The reason for the introduction of the framework can be attributed to the abnormal changes in the price of cryptocurrency. With such wild changes, the regulatory body felt the need to create awareness among the investors that they can lose every penny invested. The idea of an investor losing on every penny stems from the unclear financial rules and volatility of cryptocurrency. Also, with startups joining in the cryptocurrency wave by issuing new digital currencies via initial coin offerings ICO raised a lot of eyebrows. Thus, the involvement of regulatory body comes off as no surprise.
The apex regulatory body of G20 economies, the Financial Stability Board (FSB) came out with a statement that monitoring the size and growth of crypto assets is quite essential in understanding the potential size of wealth effects and valuation downfall.
The new framework introduced by the Financial Stability Board (FSB) exclusively focuses on how the risk of crypto asset markets can be minimized by spreading it to the other parts of the financial system.
The usage of financial techniques like the leverage and the participation of financial institutions to cryptocurrency markets are some of the effective ways of transmitting the crypto assets risks to the diverse financial system.
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