Retail investors would feel the impact of a cryptocurrency market collapse the most, while institutional investors would be better protected against such an event, according to researchers.
"At this stage, we think that retail investors would be the first to bear the brunt in the event of a collapse in cryptocurrencies' market value," a report released by S&P Global Ratings said Monday.
"We expect rated banks to be largely insulated, given that their direct or indirect exposure to cryptocurrencies appears to remain limited."
Cryptocurrencies dropped in price significantly amid a sharp sell-off earlier this month. The nascent market has recovered slightly following that decline, but the so-called market capitalization — the price of cryptocurrencies multiplied by circulating supply — is still around $330 billion off a record high posted last month.
The price of bitcoin fell below the $6,000 mark in the midst of a global stock market sell-off in early February, indicating that it shares a correlation to established financial assets.
Nevertheless, the S&P Global Ratings report said that a huge drop in the value of cryptocurrencies would still be unlikely to disrupt financial markets.
"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," Mohamed Damak, S&P Global Ratings financial institutions sector lead, said in a statement Monday.
Digital currencies are not backed by governments and authorities have become increasingly concerned by them due to speculative investing and associated illicit activities.
"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," Damak added.
It said that cryptocurrencies' underlying blockchain technology could lead to "positive" disruption in finance. Blockchain networks are decentralized, and maintain a continuously growing record of cryptocurrency transactions.