Rating agency says despite modest size of crypto market, small direct exposures by financial institutions contain contagion risks
The recent downturn in the cryptocurrency market is “a timely wake-up call,” the rating agency S&P Global said in a statement on Friday.
“The shock waves from the crypto assets downturn in recent days has remained primarily within crypto markets, and affected retail investors the most,” it said.
“And, the recent drop in the value of Bitcoin, the largest crypto asset, is not dissimilar from the one that occurred about a year ago,” the rating agency added.
The cryptocurrency market lost over $1 trillion, or nearly half of its market value, in the past five weeks.
The S&P said despite the relatively modest size of the crypto market, small direct exposures by financial institutions further contain contagion risks.
“The potential risks inherent in this ecosystem only partly illustrated by the current crypto downturn underpin the material regulatory push that we are witnessing,” the S&P said.
“Like any innovation, crypto assets can bring benefits, but also risks. The regulatory mission is a balancing act between both,” it added.