The Financial Stability Oversight Board (FSOC) released a report explaining its annual list of potential threats that may destroy the world's economy as we know it. One may expect that cryptocurrency would be placed in the top three of the list. However, to everyone’s surprise, there was no negative mention of cryptocurrency in the list. This comes in significant contrast to the statements led out by world famous investors in the past few months. Warren Buffet, for example, called Bitcoin a mirage. Similarly, the CEO of JP Morgan Chase, Jamie Dimon, also called Bitcoin a fraud and stated that people would be stupid to invest in it.
Why FSOC differs
The report of the FSOC did mention cryptocurrency and explained why, contrary to the popular opinion, it does not consider cryptocurrency much of a threat to the global economy. The reasons given by FSOC have been explained in the following points.
- The FSOC believes that cryptocurrency is used only by a marginal number of consumers.
- The cryptocurrency market is valued at just a fraction of the global economy and therefore, won’t have much impact on it.
- The FSOC believes that blockchain technology, which is the back bone of cryptocurrencies, has applications far beyond simply replacing fiat currencies.
Cryptocurrencies are a challenge
FSOC does admit that new cryptocurrencies pose a challenge for governments, due to the decentralized nature of the cryptocurrencies. In contemporary banking schemes, data is usually stored in a single place. With cryptocurrencies, the data is decentralized, which means that it is much more difficult to track.
What FSOC is saying is that it is far too soon to predict how cryptocurrencies will influence the global economy in the long term. Just a year ago, the market cap of the crypto market was less than one billion USD.