US Chief Financial Watchdog: Cryptocurrencies Are No Risk to the Financial System

By December 16, 2017Bitcoin Business
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It is evident financial systems all over the world face a multitude of threats right now. Most people would assume Bitcoin and other cryptocurrencies pose a serious risk in this regard. That is not the case, though, as Bitcoin was only briefly mentioned in a new report by the US’s chief financial watchdog. This is pretty interesting news for the country’s economy, although it does show there are some other pressing matters which will need to be addressed moving forward.

The US Economy Faces Many Threats

No one can deny any financial system in the world today is very brittle. It doesn’t take much to send economies into an upward surge or a downward spiral these days. Not only do we have to deal with monetary threats, but there are also geopolitical risks to take into account. Add cybersecurity threats and cryptocurrencies to the mix, and you get a very volatile powder keg waiting to explode.

Surprisingly, a new report by the US chief watchdog for financial systems paints a rather intriguing picture. While it is true this 152-page report is filled with potential attack vectors that may hinder the country’s economy, Bitcoin and cryptocurrencies are not among them. To be more specific, this new form of money is mentioned in a few places, but it is not considered a direct threat at this point in time. This is both good and bad news.

On the one hand, it shows cryptocurrencies can potentially be beneficial to any financial system in the world. On the other, it also shows Bitcoin and altcoins represent a drop on the boiling plate known as the financial markets. While all cryptocurrencies have seen major growth throughout 2017, their total combined value is still well below US$1 trillion. Compared to most other financial threats and emerging solutions, cryptocurrencies are nothing to worry about right now.

This is rather surprising, given the negative stance some financial moguls have taken when it comes to various cryptocurrencies. JPMorgan Chase CEO Jamie Dimon recently told the world that Bitcoin is a fraud and should be ignored. Moreover, we have heard dozens of comparisons between Bitcoin and tulip mania, even though none of these doom scenarios have ever resulted in any major changes or collapses. Cryptocurrency is a very different creature compared to more traditional financial assets and vehicles, to say the very least.

The watchdog report explains Bitcoin as follows:

Virtual currencies are only used by a very small number of consumers. We give a bit more credit to the potentially much broader applications of the so-called distributed ledger technology underpinning the innovations. It is noteworthy that this digital wave also presents a regulatory challenge, because the storage of data is decentralized, rather than being in one spot that governments can watch.

It will be interesting to see how cryptocurrencies will affect global financial markets in the future. It is highly doubtful Bitcoin or other cryptocurrencies will ever surpass traditional currencies, but that doesn’t mean these cryptocurrencies will not have their place in the world of finance. An interesting future lies ahead, as we will see some major changes to business as usual in one way or another. Moreover, it remains to be seen how regulators will respond to the challenges posed by cryptocurrencies.