Oct 13, 2021
First, the high volatility of cryptoasset prices makes it difficult to rely on them as a means of low-risk payment or settlement. In fact, if cryptoassets do not represent creditors’ rights or liabilities, the valuation of these assets does not reflect an assessment of the underlying contract claims.
Secondly, cryptoassets reflect the limitations of current decentralized distributed ledger technology. Establishing trust in a network that does not rely on trusted intermediaries is expensive, and trust is essential for trusted payment and settlement tools. The decentralization of many cryptoassets may lead to inadequate governance and disputes among network participants. In extreme cases, these assets may be damaged in a “hard fork” on the blockchain or other distributed ledgers. In addition, most of the existing cryptoassets cannot currently be used to quickly process a large number of transactions, and there may be scalability issues in the future. Moreover, due to the lack of certainty in the finality of settlement, it is difficult to determine when the key financial risks will transfer.
Third, the jurisdiction’s approach to cryptoassets may further restrict its use in payments. For example, the implementation of international anti-money laundering and anti-terrorism financing standards should limit the anonymity of cryptoasset transactions and reduce their attractiveness, because anonymity may promote the application. In addition, approaches to anti-fraud, consumer protection, and/or cybersecurity protection measures may also affect certain business cases for the use of cryptoassets.
Digital Assets and Financial Stability