A new report on cryptocurrencies from leading ratings agency S&P has described the market as merely “a speculative bet on future value”.
Titled The Future Of Banking: Cryptocurrencies Will Need Some Rules To Change The Game, the report laid out what the agency believes are the key issues with cryptocurrencies right now: that they do not meet the basic two requisites of a currency – i.e. they’re an effective mean of exchange because adoption remains minimal – and that they’re not an effective store of value because of their volatility.
The report highlighted the drop of $185 billion from the market capitalisation in the first ten days of February and also how small the space remains: The total market is around $400 million (at the report date), which is barely half of Apple Inc.
Citing the example of Bitcoin and the rapid rise in value in 2017, the report stated that the coin’s usage “changed from a payment instrument to a speculative instrument when buyers began to largely bet on their future value instead of using them for transactions”.
The report also urged caution for retail investors, stating that any new crash would hurt them the most. “We are of the view that the current version has many characteristics of a traditional bubble,” it said.
While the report recognises the power of blockchain to change how the banking sector operates, regulation is needed at a global level to change its view of cryptocurrencies.
“We believe that, if the market is to take up, it will imply great regulatory scrutiny… and will include consumer protection, impeding illegal activity, and central bank backing.”For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.