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IMF Releases New Paper to Address Crypto’s Risks to Financial Stability

Press Releases Crypto News BeInCrypto IMF Releases New Paper to Address Crypto’s Risks to Financial Stability

The International Monetary Fund (IMF) and the Financial Stability Board (FSB) released a paper describing a set of unified standards to limit the risks of cryptocurrencies. The report was produced at the request of India as the leader of the Group of 20 Economies, which meets in New Delhi later this month.

At the paper’s core is the argument that crypto assets can hurt a country’s financial stability and introduce macroeconomic risks.

IMF and FSB Urge Governments to Protect Central Banks

For example, saving money using a foreign currency-based stablecoin weakens the impact of monetary policy. Attractive foreign regulatory regimes could cause capital flight. At the same time, citizens could convert their savings into foreign currency-denominated stablecoins and reduce the availability of funds available for local investments.

Find out the best stablecoin interest rates here.

Inconsistent guidelines on crypto tax and granting crypto legal tender status can also hurt government revenue. The agencies noted these implications generally affect countries whose weak policies stimulate the search for alternative money.

To lower risk, governments must ensure that central banks focus on preserving “monetary sovereignty” instead of needing to print money to erase deficits. They must also not grant crypto assets the status of legal tender.

The agencies argue that even though stablecoins can usefully link the worlds of traditional and crypto finance, a loss of confidence in the reserves backing them can lead to a bank run. This, in turn, causes the asset to depeg from its fiat currency anchor.

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Author: David Thomas

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