Cryptocurrencies will pose a risk to financial stability if the emerging sector maintains the rapid growth of the past two years and if financial companies deepen their involvement, the European Central Bank (ECB) said on Tuesday.
The ECB, in its biannual financial stability review, said exposure to digital currencies by banks and other financial institutions on a large scale could put capital at risk and undermine investor confidence and financial and lending markets.
“Systemic risk increases with the level of interconnectivity between crypto assets and the traditional financial sector,” he said.
The highly leveraged trading offered by cryptocurrency exchanges has led investors to borrow to take on greater exposure in this market, which also increases risks to financial stability, the ECB highlighted.
Furthermore, data deficiencies in the industry also make it difficult to assess financial risks, the institution said, warning that publications from cryptocurrency exchanges and data aggregators should be treated with caution.
Source: CNN Brasil
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