Though some financial experts have expressed concern that a collapse in the digital currency markets might affect the broader financial sector, a new report from US-based financial ratings firm Standard & Poor’s contends that any impact would be almost negligible at this point. According to S&P's assessment, the markets would only be impacted if cryptocurrencies became a serious asset class and enjoyed the market confidence that comes from proper regulatory oversight.
That report, The Future Of Banking: Cryptocurrencies Will Need Some Rules To Change The Game, was released on Monday, and suggests that retail investors are at the most immediate risk for loss if the digital currency markets suffered a major collapse. S&P-rated banks, on the other hand, would have little to no risk of loss, since most are only indirectly exposed to those markets.
S&P Global Ratings Financial Institutions Sector Lead Dr Mohamed Damak noted that digital currency does not yet represent a threat to the world’s financial stability:
"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."
Damak did note, however, that those crypto markets could eventually have a greater impact on financial markets, depending upon how lawmakers and regulators respond to the issue:
“We believe that the future success of cryptocurrencies will largely depend on the coordinated approach of global regulators and policymakers to regulate and enhance market participants' confidence in these instruments.”
The report also suggested that cryptocurrency is a “bubble” and cited its rapid and unexplained rise in value, potential price manipulation, and lack of regulatory oversight as areas of concern.