Powered by momentummedia
nestegg logo
Powered by momentummedia
nestegg logo
nestegg logo

Invest

Cryptos aren’t assets, pose little market risk: S&P

By Lucy Dean · February 20 2018
Reading:
egg
egg
egg

Invest

Cryptos aren’t assets, pose little market risk: S&P

By Lucy Dean
February 20 2018
Reading:
egg
egg
egg
Cryptocurrency, currency

Cryptos aren’t assets, pose little market risk: S&P

author image
By Lucy Dean · February 20 2018
Reading:
egg
egg
egg
Cryptocurrency, currency

As cryptocurrencies are more like speculative instruments than actual assets, a collapse would have little impact on financial markets, a ratings agency has said.

S&P Global Ratings said that while cryptocurrencies currently occupy significant space in financial market discussions, the likelihood of a crypto-collapse impacting financial markets is slim.

“We believe that the characteristics of a cryptocurrency, in its current version, make it more like a speculative instrument that, if its market value were to collapse, would not disrupt global financial stability,” S&P said.

However, given that cryptocurrencies are independent from central banks and as such the chances of them entering traditional financial systems, also exposes them to a potential bubble burst.

Financial institutions sector lead at S&P Dr Mohamed Damak said, “For now, a meaningful drop in cryptocurrencies' market value would be just a ripple across the financial services industry, still too small to disturb stability or affect the creditworthiness of banks we rate.”

Advertisement
Advertisement

Retail investors to take the hit

While a collapse would have little ramifications for the wider markets, retail investors would bear the brunt, S&P said, pointing to the fact that rated banks should be protected given limited direct and indirect exposure to the currencies.

However, should cryptocurrencies become an asset class there would be a “more gradual” impact on financial services.

“We believe that the future success of cryptocurrencies will largely depend on the co-ordinated approach of global regulators and policymakers to regulate and enhance market participants' confidence in these instruments," Dr Damak added.

S&P conceded that blockchain technology has positive applications for the financial sector and could have a lasting and significant impact upon how the sector tracks financial transactions.

“The financial market infrastructure segment might also see benefit from cryptocurrencies and blockchain through the launch of new income-generating products, such as futures or exchanges based on cryptocurrencies, or the replacement of current practices by new ones based on blockchain,” S&P said.

 

Cryptos aren’t assets, pose little market risk: S&P
Cryptocurrency, currency
nestegg logo

Forward this article to a friend. Follow us on Linkedin. Join us on Facebook. Find us on Twitter for the latest updates
Rate the article

Join the nestegg community

We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians

Your email address will be shared with nestegg and subject to our Privacy Policy

Why we’ll keep delivering for our communities in the face of COVID-19

alex

As Australia tries to keep pace with a rapidly changing business and social landscape in the wake of COVID-19, Momentum Media is leading the way delivering essential content to our communities, writes Alex Whitlock, director of Nest Egg.

Read more

From the web

Recommended by Spike Native Network

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.