Low Capitalization, Institutional Exposure Make Crypto Low Risk, Says Dutch Gov't Report

A branch the Dutch government has recently released an economic risk report, claiming that cryptocurrencies present a low risk to financial stability in the country, according a report published on May 29.

The report was prepared and published by the CPB Netherlands Bureau for Economic Policy Analysis.

The CPB states in the report that at the current time, cryptocurrencies pose a low risk to the financial system due to the low level of capitalization, as well as the limited involvement of traditional financial institutions and systems.

The CPB separately noted the problems associated with crypto's use in crime financing, fraud, high crypto market volatility, and the energy consumption of crypto mining.

The report predicts that crypto-related risks will increase with more interaction with government financial institutions.

The agency also states that cryptocurrencies are not "Money substitutes," claiming that users generally prefer to hold their crypto instead of using it as an everyday payment method.

The report stressed the need for balanced financial regulation.

The CPB compared the risks of a lack of financial regulation equally with strict regulations, claiming that overly harsh measures can increase the activity of "Shadow banks."

The CPB has been tasked with providing a financial risk report at the request of the Parliamentary Committee of Inquiry on Financial Assistance every year since 2012.

Affirming the low negative impact of crypto on financial stability, the CPB claimed that the most important financial risks are currently low interest rates and the involved risks of reducing the sustainability of debts on a macroeconomic level.