The Federal Reserve of the USA is planning to include a collapse of the digital assets market to the risks for consideration while carrying out its supervisory stress tests.
Pursuant to the Thursday announcement, the Federal Reserve is planning to recognize a collapse of the BTC market among the most valuable market risks. Notably, the adjustments were suggested by a commenter. He believes the entity should see such developments as one of various shocks factors, like, for example, a war with North Korea as well as losses driven by a trader’s misconduct.
The Fed board explained that it is going to make these controlled stress tests rather dynamic, adding various extreme scenarios. Such risks are taken into account from the moment of the creation of the tests themselves and are reviewed from time to time.
“To conduct the supervisory stress tests, the Board develops three scenarios—a baseline, adverse, and severely adverse scenario—and projects a firm's balance sheet, risk-weighted assets, net income, and resulting post-stress capital levels and regulatory capital ratios under each scenario,” the Fed official notification reads.
If approved, the latest proposed scenarios will come into force on April 1.
Apart from all the above, the Federal Reserve’s adverse scenarios may now include a decrease in the nominal house price index as well as a less than 4% unemployment rate change given certain economic circumstances.