S&P Global Ratings: Cryptocurrency Crash Will Not Impact Financial Markets

In a report titled The Future of Banking: Cryptocurrencies Will Need Some Rules to Change the Game, S&P said cryptocurrencies represented a speculative instrument which meant a collapse would not disrupt global financial stability.

If the virtual currency space did fall off a cliff, the research firm warned retail investors would be the first affected, however banks remained "largely insulated" due to the limited direct or indirect exposure.

Mohamed Damak, financial institutions sector lead at S&P Global Ratings, said: "For now, a meaningful drop in cryptocurrencies' market value would be just a ripple across the financial services industry, still too small to disturb stability or affect the creditworthiness of banks we rate.

Beware if you are a speculator: What wealth managers are telling their clients on Bitcoin

"We believe that the future success of cryptocurrencies will largely depend on the coordinated approach of global regulators and policymakers to regulate and enhance market participants' confidence in these instruments."

Bitcoin's rise has been nothing sort of dramatic. After exploding over 1,500% in 2017 to finish the year at $14,156, the currency then fell to a year low of $6,914 on 5 February before bouncing back to trade above $10,000 at $10,016 on 15 February.

Cryptocurrencies have so far caused a mixed reaction within financial institutions, with Wall Street bear and former director of the Office of Management for President Ronald Regan David Stockman stating the cryptocurrency boom would end disastrously.

"It is basically a class of really stupid speculators who have convinced themselves that trees grow to the sky," he said.

"It will burn out in a spectacular crash. All of these latter-day speculators will have their hands burned to a crisp, and they will learn the proper lesson."

However, it was announced in January two ex-BlackRock fixed income managers have joined forces to set up a cryptocurrency hedge fund.