A Survey Of European Economists Says Global Financial Stability Not At Risk Due To Bitcoin

According to a group of leading economists from Europe, bitcoin is unlikely to shake up the mainstream markets and as such the cryptocurrency poses no real treat to financial stability.

There have been repeated warnings from senior financiers about the risks that are presented by bitcoin which were correct, believed the majority of almost 50 academics from universities across Europe who took part in a survey that was conducted by the Centre for Macroeconomics and the Centre for Economic Policy Research.

No significant amounts of tis digital currency is owned by any of the major investment groups, said the economists and for whom, the main reasons for their comfort with bitcoin’s ability to disrupt the financial market were its small size and its unlinked nature with the larger wider financial system. While the total value of global shares stands at $80 trillion, the total market value of bitcoin is a minnow with $300 billion even though the cryptocurrency has seen a surge of over 9005 in its value this year alone.

Bitcoin has been described as a speculative bubble that requires an apocalyptic health warning from central banks to the investors and as a Dante’s Inferno, by the chairman of the Royal Bank of Scotland. Warnings against the bitcoin have also been issued by the chief executives of JP Morgan and Goldman Sachs and other senior financiers.

After the Chicago Mercantile Exchange (CME) launched the bitcoin derivates trading – it became the second exchange to do so last weekend and since then there are hopes by bitcoin backers that it would soon become acceptable to the wider financial system.

Earlier crises have showed that bitcoin could “take just one key financial institution taking on large risky positions to put the system at risk”, said Wouter den Haan of the London School of Economics while participating in the survey.

Tax evasion and other criminal activities would result from the transaction bitcoin and because of the ability of bitcoin to stay untraced after transactions and therefore governments need to enforce some form of regulatory control over cryptocurrencies, believed the majority of the economists taking part in the survey, even though the majority also were of the firm opinion that the risls emanating from bitcoin to financial stability were limited.

“One strand of current policy is to crack down on money laundering and tax evasion through tax havens. So it would seem odd to let cryptocurrencies get around these restrictions,” said Nicholas Oulton of the London School of Economics.

Following a second incident of hacking and stealing of bitcoin, a South Korean cryptocurrency exchange is set to be filing for bankruptcy and this highlighted the vulnerability of bitcoin and the growing concerns about the security of cryptocurrencies even while there is boom in bitcoin trading.

The South Korean exchange is called Youbit. According to a recent South Korean newspaper report, North Korean hackers were linked to a hack and heist of almost 4,000 bitcoins from the exchange in April.

The exchange had been robbed by hackers of 17 percent of its total assets, Youbit announced on its website on Tuesday.

(Adapted from The Guardian)

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Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability

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