Crypto Assets Could ‘Soon Pose Risks to Financial Stability,’ According To IMF
According to International Monetary Fund (IMF) “crypto assets are no longer on the fringe of the financial system,” and they “could soon pose risks to financial stability especially in countries with widespread crypto adoption.”
In a recent blog post, the economists from International Monetary Fund (IMF) warned about the risks that crypto assets pose to financial stability. The post is authored by three economists from the IMF’s Monetary and Capital Markets Department: Tobias Adrian, Tara Iyer, and Mahvash S. Qureshi.
According to the post:
“Crypto assets such as bitcoin have matured from an obscure asset class with few users to an integral part of the digital asset revolution, raising financial stability concerns.
Our analysis suggests that crypto assets are no longer on the fringe of the financial system. Given their relatively high volatility and valuations, their increased comovement could soon pose risks to financial stability especially in countries with widespread crypto adoption.
It is thus time to adopt a comprehensive, coordinated global regulatory framework to guide national regulation and supervision and mitigate the financial stability risks stemming from the crypto ecosystem.”
Back in October last year, three other people from the IMF’s Monetary and Capital Markets Department similarly warned about the risks crypto assets pose to financial stability.
Dimitris Drakopoulos, Fabio Natalucci, and Evan Papageorgiou detailed:
“Cryptoization can reduce the ability of central banks to effectively implement monetary policy. It could also create financial stability risks.”
The U.S. Federal Reserve is, however, not seemingly not worried at all about crypto posing a threat to the country’s financial system.
In December 2021, Fed Chairman Jerome Powell dismissed cryptocurrencies as a financial stability concern but warned that they are risky since “They’re not backed by anything.”
Bank of England’s deputy governor for financial stability, Sir Jon Cunliffe, warned in November last year that cryptocurrency is getting closer to posing a threat to global financial stability due to the sector’s rapid growth.
