In its report, the International Monetary Fund’s Financial Stability Board said the rising use of cryptocurrency could pose greater risks to the global economy.
The Global Financial Stability Report released on Tuesday The International Monetary Fund, or IMF, said the use of crypto instruments and stablecoins in emerging markets and emerging economies might threaten economic and financial security. The IMF said that the risks are “contained for the moment” but urged regulators to be vigilant about cryptocurrencies and keep them under control.
The IMF said it was evident that, as the cryptocurrency market developed and grew, “new sources of risk” were emerging, like stablecoins as well as decentralized finance, also known as DeFi. Particularly, the IMF has identified the sector at risk of hacking as being characterized by a “lack of transparency in the distribution and issuance” of tokens and operational risks, such as outages during times of high volatility. The group also identified “meme tokens” and centralization — a significant exchange such as Binance that handles a significant amount of trading volumes. Tether can be blamed for the bulk of the stablecoins available — as potential factors to be considered.
Highlighting the dangers of developing nations using electronic assets has become a typical tagline of the IMF and the IMF, having previously discussed the risks of central banks’ stabelcoins and digital currency. The IMF has also warned El Salvador and the Marshall Islands that Marshall Islands and El Salvador that recognizing the digital currency in legal form could “raise the risk of stability of the macroeconomic and financial system and financial integrity.”
This month, the IMF published a series of policies for emerging and developing economies that will ensure financial stability in the face of global adoption of crypto due to the managing director Kristalina Georgieva’s assertion the fact that over 50% of the central banks around the globe are looking at ways to begin launching digital currencies.
Gargi Sinha is working as Senior Journalist at Confea. She has completed her Masters in Journalism from Delhi University. She has interest in crypto and blockchain technology.