The IMF has urged lawmakers to take more regulatory action to avoid the impact of crypto asset volatility affecting banks and traditional financial institutions.
The IMF stated that the volatility and instability of the cryptocurrency market is beginning to worry not only regulators, but also representatives of the traditional financial sector. Given the expansion of links between the cryptocurrency and stock markets, the instability of the crypto market resulting from various collapses increasingly poses a threat to traditional financial institutions and the financial stability of countries.
To control and manage risks, the IMF proposes to develop global rules for virtual asset service providers, in particular, to prohibit mixing client assets placed in cryptocurrency companies with investments in traditional financial companies.
In addition, the IMF recommended that lawmakers consider opportunities to prevent the cryptoization of the economy and the replacement of fiat currencies through crypto assets, primarily dollar stablecoins.
Since such substitution could cause capital flight, loss of monetary sovereignty, and threaten a country’s financial stability, including creating new challenges for policy makers, the IMF is asking the authorities to address the root causes of cryptoization proactively by boosting confidence in their domestic economic policies, currencies, and banking systems.
Earlier, researchers at Cornell University said that a drop in user confidence in stablecoins could lead to a collapse in the bond and US Treasury markets.
Source: Bits
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