Crypto no longer among top 10 potential risks according to US central bank
One of the 12 federal reserve banks in the United States, the Federal Reserve Bank of New York, ran a study to determine the hazards that will outweigh cryptocurrency in 2022. The results concluded that crypto is now safer.
Crypto now not among the top financial risks
The advocates of traditional finance are still adamant about ignoring the financial risks associated with cryptos and the crypto ecosystem.
However, a survey conducted by the Federal Reserve Bank of New York, one of the 12 federal reserve banks in the United States, revealed 11 factors that will outweigh cryptos in terms of risk in 2022.
According to a central bank survey conducted by the Federal Reserve System, geopolitical tensions, foreign divestments, COVID-19, and rising energy costs are among the most frequently mentioned possible concerns for the U.S. economy.
Cryptocurrency is ranked 11th out of 14 reasons that can put your finances in danger, showing that investor perceptions have changed due to the tireless work of crypto entrepreneurs to spread awareness.
But when it comes to assessing the dangers of investing in cryptocurrencies, the U.S. central bank continues to hold a negative view of the technology.
The paper noted that specific cryptocurrencies, such as Bitcoin (BTC) and Ether (ETH), had seen their value decline by around 69% from their peak in November 2021.
Prices for digital assets have seen significant volatility in recent years, and speculation and risk appetite are the main factors behind this.
The central bank also mentioned the collapse of the Terra environment, which highlighted that companies with direct exposure to the internally stable TerraUSD (UST) experienced financial difficulties, occasionally resulting in bankruptcy.
Growth of Crypto
Crypto assets and the enormous range of related goods and services have expanded quickly in recent years. Policymakers seem to find it challenging to monitor the dangers posed by a sector where most operations are uncontrolled or only minimally regulated.
According to the International Monetary Fund (IMF), dangers to financial stability may soon become systemic in some countries. Uncoordinated regulatory actions raise the possibility of facilitating potentially unstable capital flows, which is another cause for concern.
The IMF estimates the market value of cryptos to be $2.5 trillion. This could reflect the substantial economic worth of the underlying technology advancements, such as the blockchain, but it could also be froth in a market with stretched valuations.
Cryptocurrency could be promising
Because of the potential for cryptos to revolutionize the current financial system, regulators are paying close attention to the difficulties they present. The two main topics are the potential effects of cryptocurrencies on financial stability and the requirement to safeguard vulnerable customers.
The 2022 particular study covers more ground than just digital currencies like bitcoin. It examines various crypto-related products, including central bank digital currencies (CBDCs), non-fungible tokens (NFTs), and stablecoins. It emphasizes policy activity in essential nations in light of the need to create a regulatory framework.
Also, it looks at some of the enduring myths around cryptos and their implications for monetary policy and financial stability. As embodied by decentralized autonomous organizations, it also considers evolving structural models for financial institutions emerging from the crypto world (DAOs).
