IMF global financial stability report sees complex roles for cryptocurrency, DeFi

IMF global financial stability report sees complex roles for cryptocurrency, DeFi

The International Monetary Fund’s Global Financial Stability Report released Tuesday shows that the global financial environment has been tightened by the conflict in Ukraine. This follows the outbreak of the coronavirus pandemic. The global economy faces many challenges due to rapid changes in fintech as well as the misuses and uses of cryptocurrency.

The report states that the war and pandemic have caused an acceleration in “cryptoization” of emerging markets. This is due to increased speculation during the pandemic, and subsequent attempts to evade sanctions. The report concluded that cryptocurrency is not practical for evading sanctions because of the industry’s compliance. Mixers, decentralized exchanges, and privacy coins might allow for some circumvention. However, it would be limited by the availability of liquidity.

Another risk is that sanctioned countries may use their excess energy, which could have been built up due to sanctions, to mine proof of work cryptocurrencies. However financial flows from such activity would be limited. Due to crypto’s greater difficulty in immobilizing, countries that are concerned about being under sanctions in the near future might find crypto attractive as a reserve currency and less attractive as major fiat currencies.

All these issues highlight the need to have a coordinated regulatory approach for crypto in order to maintain effective capital flow control. This control could also be maintained by improving non-blockchain payment technology.

According to the report, regulation is not keeping pace with rapid changes in fintech. Decentralized finance (or DeFi) is becoming more interconnected to traditional finance as it is being adopted by traditional financial institutions. DeFi’s lackluster governance poses a risk to financial stability, and creates uncertainty in the legal environment. Although it is susceptible to cyber, market, liquidity, and cyber risks, DeFi could offer benefits in terms of efficiency and financial inclusion.

The IMF advised regulators to focus on DeFi’s elements, including stablecoin issuers and central exchanges. They also encouraged the creation of industry-wide self-regulation bodies.

2021's Most Anticipated Growth & Wealth-Building Opportunity

Join Thousands of Early Adopters Just Like You Who Want to Grow Capital and Truly Understand Cryptocurrency Together

Amy Jimenez

Amy Jimenez– Services My name is Amy Jimenez, and I am the main writer behind the" allthetopnews.com" for the ground-breaking and most fragile bits of knowledge into the most recent news in the services sector. I began my voyage of work as an autonomous investment advisor. I had around 4 years of involvement in this field. I am a free soul so; my energy for investigating the world has taken me to the countries over the globe and allowed me to report for a part of the best news affiliations. At present, I am a full-time manager as experienced in the account and began to utilize my capacities.

2021's Most Anticipated Growth & Wealth-Building Opportunity

Join Thousands of Early Adopters Just Like You Who Want to Grow Capital and Truly Understand Cryptocurrency Together

Close Bitnami banner
Bitnami