IMF warns of big risks from unregulated crypto market
The International Monetary Fund (IMF) closely monitors what is going on in the financial world. Recently, the crypto market has appeared on its radar. According to the IMF, digital assets pose considerable challenges to markets worldwide.
In its latest Global Financial Stability Report, the fund underlined the major risks of the booming crypto market and the proliferation of digital coins. The IMF also believes that governments need to tighten regulation over the crypto market in order to safeguard financial stability. "Tougher regulation is needed to prevent the rapid growth in cryptocurrencies leading to financial instability, defrauding of consumers and the funding of terrorism" the International Monetary Fund noted. A tenfold increase in the market value of crypto assets to more than $2 trillion since the beginning of 2020 requires more close and collaborative supervision by governments. The IMF's Global Financial Stability report states that many new cryptocurrencies lack reliable risk management practices. The authors of the report also mentioned several cases of hackers attacks. "There are also several high-profile cases of hacking-related thefts of customer funds. So far, these incidents have not had a significant impact on financial stability," they pinpointed.
In addition, the IMF noted that some cryptocurrencies were created solely for speculation and fraud. In 2021, the market capitalization of stablecoins, cryptocurrencies that are tied to fiat currencies, has quadrupled to $120 billion. "Given the composition of their reserves, some stablecoins could be subject to runs, with knock-on effects to the financial system," the report reads. Currently, countries adhere to different policies when it comes to the crypto market. While El Salvador accepts bitcoin as an official means of payment, China completely prohibits all crypto transactions, vowing to take tougher measures to curb their use once and for all.