S&P shows no concern over the collapse of Cryptocurrencies
The widespread popularity of the cryptocurrencies over the past year has raised eyebrows over the inherent risk in these financial instruments.
However, credit ratings agency S&P is of the view that the breakdown in the cryptocurrencies will neither disturb the stability of the traditional financial sector nor will it affect the ratings.
Presently, any fall in the values of cryptocurrencies will only affect the individual investors not the financial system.
According to Mohamed Damak, S&P Global Ratings financial institutions sector lead, this is because the share of these virtual currencies is miniscule as compared to the traditional financial institutions.
Furthermore, Damak believes the future largely depends on the regulators and the policy makers to expand the market of such currencies by enhancing the confidence in these financial instruments.
On the other hand, ECB board member, Yves Mersch, is concerned about the implicit alliance between the virtual markets and some financial institutions. He was of the view that there should be strict segregation of assets and liabilities of such institutions.
Especially those who are involved in VC activity.
Further, he cautioned the central banks to offer liquidity, only to prevent any unforeseen upset in the financial system rather than to those who are engaged in speculation.