Bitcoin and other cryptocurrencies are a hot topic among experts and amateurs. Anyone would agree that digital money is making changes in the financial world as we know it. But the question is, how big of an impact do cryptocurrencies possess at the moment?
Looking at the bigger picture, it is crucial to note that cryptocurrencies could be used to facilitate financial crimes and launder money. Bitcoin has soared in value during 2017, rising over 1000% against the dollar and leading to growing interest in cryptocurrencies from many financial institutions. But, at the moment, there aren’t enough people or institutions who possess cryptocurrencies, so they are not a systematic threat to financial stability. In other words, Bitcoin, for example, is still not integrated enough with traditional banking and that’s the reason it (bitcoin) can’t make a necessary impact for a financial crisis.
Confirmation of this statement is a survey conducted among economists, which suggested that cryptocurrencies do not yet pose such a risk because they are “too small and too detached from other financial markets.”
The financial crash of 2008 made room for the rise of cryptocurrencies. Even though the crisis made room for cryptocurrencies, it is too soon to assume that they have enough power to start a new financial crisis. From a different perspective, another financial crisis could give power to cryptocurrencies that will make them systematically important. This is what they currently lack – systematic importance.
Simply put, it is possible that cryptocurrencies could trigger the next financial crisis but experts would agree that they won’t because, for now, cryptocurrencies still aren’t a systematic risk for financial systems. They could become that in near future, but before that happens if a financial crisis would occur it wouldn’t be because of cryptocurrencies. How soon could they become a reasonable threat? Maybe in a couple of years.