A globally-renowned financial authority, the FSB, recently declared that more data is needed to meet global standards to have ample knowledge of the crypto industry.
According to the Financial Stability Board (FSB), the new roadmap for examining the crypto market is needed to ascertain the financial stability risks of numerous cryptocurrencies.
In a 30-page report published on Wednesday, the new report outlines a precise number of cryptocurrency-related risks and that of the sector, including assets like BTC, USDT, and DeFi.
The report indicates the more common opinion of people about the crypto industry, like the potential loss associated with dome stablecoins which are seen as a threat to the stability of the entire industry due to the dominating nature of the stablecoins in terms of trading volumes.
The increased DeFi adoption poses a threat to financial stability, according to the FSB. In most cases, the absence of an easily identifiable medium in transaction decentralized finance (DeFi) might lead to the involvement of other financial institutions, which is not a good thing.
Most importantly, the FSB cited the lack of adequate data as one of the most significant risks associated with the cryptocurrency industry. The absence of consistent, valid, and objective data on the crypto market and its transparent dealings with the mainstream financial system is a cause for concern. Additionally, such a gap can significantly affect identifying and determining risks that may arise from the industry.
FSB’s Position On Data
Data is crucial in all aspects of life and transactions. The crypto industry, a subset of the mainstream financial sector, can perform better with readily available and accurate data. The available data on the blockchain networks do not reflect the true identity of the majority of the users engaged in the activities of the cryptocurrency.
Data gaps like the share of a household’s investment in crypto assets, the number of frauds recorded in the crypto ecosystem, the involvement or exposure of the banking system, token holders, and the total number of transactions in a given period. The FSB also noted that survey-based data, often used in the crypto space, is not flexible enough and updated regularly.
Furthermore, the FSB points to the almost non-existent data in DeFi networks, where the actual share of retail is measured against the industry’s participation and the total number of decentralized applications in a single blockchain. All these things are unknown to even the regular players in the industry.
The Way Forward
The Financial Stability Board wants the industry to chart a way to actualize the data needs of the crypto ecosystem to meet global standards that any regulatory agency can use to make a decision, paving the way for more participation from the mainstream financial sector and others.
The movement of crypto assets is borderless, making it difficult to have a complete picture of the market, its potential, and prospects said the FSB. The data gaps are primarily due to standardized procedures and regulations.