Crypto Could Soon Pose Risks to Countries’ Financial Stability – Regulation Bitcoin News

Economists at the International Monetary Fund (IMF) say that “crypto assets are no longer on the fringes of the financial system.” In addition, it “could soon pose risks to financial stability especially in countries that adopt crypto on a large scale.”

“Our analysis indicates that crypto assets are no longer on the fringes of the financial system.”

The International Monetary Fund (IMF) published a blog post on Tuesday warning of the risks that crypto assets pose to financial stability. The publication was written by three economists from the IMF’s Monetary and Capital Markets Department: Tobias Adrian, Tara Iyer, Mahfash S. Qureshi.

“Crypto assets such as Bitcoin have matured from an obscure asset class with few users into an integral part of the digital asset revolution, raising concerns about financial stability,” the IMF post explains.

The authors detailed:

Our analysis indicates that crypto assets are no longer on the fringes of the financial system. Given their relatively high volatility and valuations, their increased correlations could soon pose risks to financial stability especially in countries that rely extensively on crypto.

“It is time, then, to adopt a comprehensive and coordinated global regulatory framework to guide national regulation and oversight and mitigate the financial stability risks arising from the cryptocurrency ecosystem,” they wrote.

Similarly, three other people from the IMF’s Monetary and Capital Markets Department warned in October of last year about the risks posed by crypto assets to financial stability. Dimitris Dracopoulos, Fabio Natalucci and Ivan Papagorgio detailed: “Cryptocurrency can reduce the ability of central banks to effectively implement monetary policy. It can also lead to risks to financial stability.”

However, the US Federal Reserve is not worried about cryptocurrencies harming the country’s financial system. In December last year, Federal Reserve Chairman Jerome Powell dismissed cryptocurrencies as a financial stability concern, but warned that they are risky because they are “not backed by anything.”

Meanwhile, the Bank of England’s Deputy Governor for Financial Stability, Sir John Cunliffe, warned in November last year that the cryptocurrency was close to posing a threat to global financial stability due to the rapid growth of the sector.

What do you think of the analysis of economists in the International Monetary Fund? Let us know in the comments section below.

Kevin Helms

Kevin, an Austrian economics student, found Bitcoin in 2011 and has been a missionary ever since. His interests lie in Bitcoin security, open source systems, network effects, and the intersection between economics and cryptography.

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