An article published today by the IMF shared the effects and challenges of cryptocurrencies on financial stability.
In the article, it was emphasized that the regulation of this area is essential for financial stability by calling on the countries. The headlines from the article, which also mentions the benefits of crypto assets, are as follows:
“Crypto-assets offer a new world of opportunities: Fast and easy payments, innovative financial services, inclusive access to previously “unbanked” parts of the world. All of this is made possible by the crypto ecosystem.
But with opportunities come challenges and risks. The latest Global Financial Stability Report explains the risks posed by the crypto ecosystem and offers some policy options to help navigate this uncharted territory.
The combined market capitalization of all crypto assets exceeded $2 trillion as of September 2021, a 10-fold increase since the beginning of 2021. An ecosystem full of exchanges, wallets, miners, and stablecoin issuers is also thriving.
Many of these organizations lack strong operational, governance and risk practices.
Consumer protection risks remain significant.
The (pseudo-)anonymity of crypto assets creates data gaps for regulators and can open unwanted doors for money laundering and terrorist financing.
Looking to the future, widespread and rapid adoption could pose significant challenges, strengthening dollarization forces (or in this case, cryptocurrency) in the economy, where citizens are starting to use crypto assets instead of local currency.
Cryptography can reduce the ability of central banks to implement monetary policy effectively.
Given the potential of crypto assets to facilitate tax evasion, threats to fiscal policy may also intensify.
As a first step, regulators and auditors should be able to monitor the risks posed by rapidly addressing rapid developments and data gaps in the crypto ecosystem.
National regulators should also prioritize the implementation of existing global standards.
As the role of stablecoins grows, regulations must be commensurate with the risks they pose and the economic functions they serve.
In some emerging markets and emerging economies, cryptocurrency can result from weak central bank credibility, vulnerable banking systems, inefficiencies in payment systems, and limited access to financial services. Authorities should prioritize strengthening macroeconomic policies and consider the benefits of issuing central bank digital currencies and improving payment systems. “