You’re more or less correct, or so I believe. Hope someone else smarter can chime in as well and correct me if need be.
Here’s how I understand it. When a country accesses a foreign country’s market, currency swaps have to be made. There’s not a transparent system for who owes who and for how much, etc. Since we’re talking about 10s and 10s of trillions of dollars in swaps and IOUs, a massive scale, the lack of transparency could spell bad news. Imagine if there’s corruption involved anywhere. Imagine if there’s a further downturn, mass liquidations, mass swaps for native currency, a crunch on dollars as firms raise capital etc. Seems like very messy accounting that’s difficult for regulators to audit and keep track of and difficult for central banks to support in times of crisis.
TLDR: There are tens of trillions of dollars in currency swaps and liabilities that are difficult to audit and account for. Because of the scale of money and lack of transparency, there’s a lot of room for something to go wrong.
b1ackfyre OP t1_iz1zatj wrote
Reply to comment by [deleted] in FX swap debt a $80 trillion 'blind spot' global regulator says by b1ackfyre
This article isn’t about crypto.