IMF Counsellor Says Cryptoization Could Bring Risks For Markets

An IMF counsellor says cryptoization could bring risks for the emerging markets because they are facing immediate and acute risks as a result of replacing traditional currencies so let’s read more about the warning in today’s latest crypto news.

As the world continues pointing its fingers at El Salvador’s BTC experiment, the senior IMF Counsellor warned that crypto poses acute risks for the stability of the financial system. Using the term cryptoization to explain the process of existing established currencies that are replaced by digital assets, the IMF financial counselor Tobias Adrian said that the capital flow management measures will need to be fine-tuned.

Applying established regulatory tools to manage the capital flow could be more challenging when the value is transmitted via new instruments and new channels with new service providers that aren’t regulated entities can cause destabilizing capital flow on the markets while the use of crypto in place of fiat money brings acute risks:

“Crypto is being used to take money out of countries that are regarded as unstable [by some external investors],” said the IMF official, adding that it’s “a big challenge for policymakers in some countries.”

The crypto market lost more than $1 trillion in value since BTC hit an all-time high above $69,000 and the benchmark cryptocurrency is trading at $37,600 down by 18.7% in the past month and almost 46% off the November high. The IMF is also worried about the BTC growing correlation to the traditional financial markets like stocks and government bonds:

“The correlation between crypto and equity markets has been trending up strongly. Crypto is now very closely tied to what is happening in equities. We can’t just dismiss it.”

El Salvador became the first country in the world to adopt BTC as a legal tender last year and the move was initially announced by president Nayib Bukele during a Bitcoin conference in Miami a year ago. The IMF urged El Salvador to ditch the legislation and argued that the country’s economy is getting worse:

“The adoption of a cryptocurrency as legal tender […] entails large risks for financial and market integrity, financial stability, and consumer protection. It also can create contingent liabilities.”

The IMF said that comprehensive international standards are needed to tackle the risks and urged regulators to establish a consistent regulatory approach to crypto.

Source: https://www.dcforecasts.com/altcoin-news/imf-counsellor-says-cryptoization-could-bring-risks-for-markets/