Market Experts View Cryptocurrencies As Major Risk, Fed Survey Reveals

The latest version of the US Federal Reserve's Financial Stability Report has highlighted cryptocurrency as one of the threats to financial stability. The survey polled responses from market experts, including investors and academics, political advisers, and brokerage firms.

Fear of Cryptocurrency Replaces Coronavirus Pandemic Worries

Cryptocurrencies like Bitcoin and stablecoins were seen as a potential risk to the financial stability of the existing financial system, according to about 20% of the 24 professionals contacted by the Fed in the report.

Recall that the Feds had not included cryptocurrencies or stablecoins as a threat in a previous analysis of the risks. Instead, the coronavirus pandemic was mentioned in the previous report published in November.

The top risks or vulnerabilities in the Thursday report were all associated with the pandemic and its effects on the US and global economies. “Vaccine-resistant variants” ranked the highest, with 60% of respondents earmarking it as a potential threat to the continued stability of the economy.

This was followed by a “sharp rise in real interest rates,” which took 50%.

“Inflation surge” came next, with 45% of respondents stating this may adversely impact the economy. “US-China tensions” and “risky asset valuations/corrections” both saw 35% of participants tapping them as probable threats, among other concerns.

Fed Reserve, A Potential Threat Not Crypto

The Federal Reserve has been seen as a potential threat to financial stability in the past due to the alleged printing of trillions of dollars by the Central bank, which sprung worries of inflation.

The Fed was said to have pushed the printing of dollars agenda as one of the many tools to help prop up the ailing economy during the coronavirus pandemic.

It also said that it could allow inflation to exceed its 2% target to escape the pandemic-induced recession; it won’t rush to raise rates to head off inflation.

Although Bitcoiners and crypto enthusiasts have argued that the Feds money printing practices could threaten financial stability and cause inflation, some economists do not believe so.

These concerns come at a time where cryptocurrencies have gotten a worldwide embrace from mainstream markets and institutional investors. Companies like Tesla, PayPal, Microsoft, Etsy, VISA, MasterCard, among others, have increasingly adopted cryptocurrencies for payments and services.

MasterCard recently signed a partnership with crypto exchange Gemini to help launch its cryptocurrency rewards credit card. The credit card would offer crypto cashback to Gemini customers every time they shop with it.

In the same vein, VISA partnered with Fintech firm Tala to push the use of the USD Coin (USDC). The collaboration involved Circle, the company behind USDC, and the Stellar Development Foundation that oversees the XLM cryptocurrency coming together to provide access to USDC via its digital wallet.