Global crypto adoption is growing so rapidly that top US financial regulators have raised concerns over the risks involved.
They have cautioned that climate and crypto are among the potential risks to financial stability.
Financial firms to be monitored
Due to the emerging threats posed by current issues such as digital crypto assets — a sector worth nearly $3 trillion, a council was created and mandated to monitor risks to the financial system of the US.
The Financial Stability Oversight Council (FSOC) is a collaborative body established under the Dodd-Frank Wall Street Reform and Consumer Protection Act. According to the US Department of the Treasury.
It’s chaired by the Secretary of the Treasury, Janet Yellen, and consists of top financial regulators, the Federal Reserve, SEC, Comptroller of the Currency among the 10 voting members, and 5 non-voting members such as the Director of the Office of Financial Research.
The elite council issued a report highlighting the possible effects of crypto. They noted risks such as; tax evasion, money laundering, and crypto-related crimes, such as crypto used in ransomware attacks. Lately, crypto hacks have surged, perhaps due to anonymity in crypto transactions.
Earlier this month, BitMart lost almost $150 million of cryptocurrencies after hackers stole a private key and broke into the company account.
In addition, the report also said digital assets such as stablecoins, though marketed as less volatile, may “illicit financing, national security, cybersecurity, privacy, and international monetary and payment system integrity.”
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Climate change has been a concern in most industries, including the financial sector. The US Council recommends that investors consider climate while regulators advise on best practices.
High volatility driving many to crypto
While crypto has made some lucky investors become overnight millionaires, the sector is considered a risky bet due to its volatility.
This volatility is fuelling many into buying cryptocurrencies mainly for speculation. In recent times, there have been predictions that bitcoin — the largest cryptocurrency by market capitalization will hit $100k, either by 2023 or much sooner.
Some investors have high hopes for those predictions, while others want to consider buying altcoins — alternatives to bitcoin. The most common altcoins are; Ethereum (ETH), XRP, Stellar (XLM), Polkadot (DOT), Monero (XMR), Litecoin (LTC), which are inexpensive compared to bitcoin.
This sudden boom and momentum in crypto investments are attracting attract both professional and amateur investors. However, regulators can’t tell how much is tied directly to the economy and say the investment may not be ideal for many.