The Central Bank of China included a separate section on cryptocurrencies for the first time in the latest version of its financial stability report.
The Central Bank of China, also known as the People’s Bank of China for the first time in history opened a separate section on cryptocurrencies in its financial stability report. In this section, cryptocurrencies They have similar risks to other investment instruments and at this point similar regulations It was stated that it would be necessary.
Creating a separate section for cryptocurrencies has been interpreted as an ideal method to reduce data gaps, reduce fragmentation, and eliminate regulatory arbitrage.
On the other hand, some components specific to cryptocurrencies makes this sector riskier than traditional financial products highlighted:
All the risks of unregulated illegal assets in the traditional market also exist in the cryptocurrency space. New types of risks, such as the lack of “negative feedback” regulatory mechanisms in self-executing smart contracts, are more likely to lead to “flash crashes” in the market. Security gaps in the process of data interaction between blockchain and off-chain are vulnerable to hacking, leading to market manipulation and market failure.
In the report decentralized finance (DeFi) Many of the platforms belonging to the sector are actually “central” has structures and this situation brings with it It brings great risksfaded:
The governance mechanism of decentralized finance (DeFi) is essentially “centralized” and can be easily controlled by a few insiders to the detriment of other investors. The anonymity of assets and the difficulty of their recovery leads to risks of money laundering and counter-terrorism financing.
In the said report, the central banks and financial regulators of the G20 countries To the Financial Stability Board (FSB) was also included. Addressing the FSB’s “hard” cryptocurrency regulations and making statements supporting them at some point, the report emphasized the necessity of a global and coordinated regulation system.
Making such a decision in China, where Bitcoin and cryptocurrencies are banned, is thought to be a big step for the market, which is thought to start a bull season soon. The fact that China made a “rule” even though it was already banned brought to mind that it has relatively started to recognize this sector again.
Pan Gongsheng, the new governor of the Central Bank of China, said that he would stop speculations by promising about Bitcoin.