The International Monetary Fund has repeatedly voiced its concerns about cryptocurrencies, especially since this emerging market is growing so rapidly but without regulating its regulatory framework.
The total capitalization of all cryptocurrencies exceeded 2 trillion. dollars in September this year, an amount ten times the market value they had at the beginning of 2020, according to IMF data.
Evan Papageorgiou, deputy head of the fund’s cryptocurrency department, told CNBC in October that “the cryptocurrency ecosystem has developed significantly. The process shows remarkable resilience, although there have been some interesting stress tests.”
One of the problems the IMF has identified is that many of the people and financial institutions that trade in this type of asset “lack strong operating, governance and risk practices.”
The Fund has therefore stressed that consumers are taking risks, adding that there is simply “insufficient disclosure and oversight” in this area. money, as well as for financing terrorism ”.
Other institutions point out that more moves need to be made to make these investments safer.
In each case, they have seized it, despite obstacles we can scarcely imagine. ”
The influencers
The financial regulator in the United Kingdom, the FCA, has warned of the link between social media and investing in cryptocurrencies.
“Social media influencers are usually paid by fraudsters to help them collect and dispose of cryptocurrencies for profit. Some influencers promote cryptocurrencies that turn out to be non-existent,” said Charles Randell, president of FC Randell. during his speech in September.
He added that because of how new this technology is, “we have not seen what will happen in a complete economic cycle. We just do not know when or how this story will end, but – as with any new form of speculation – it may not end. good”.
Kim Kardashian, with more than 200 million followers on Instagram, was paid earlier this year to advertise a cryptocurrency through her account. Critics of the move pointed out how little detail was known about those who created the ethereummax, which Kim advertised. “This is not a financial tip, I’re just sharing what my friends told me about the ethereum max token!” it was posted for a fee.
Other social media users, also with huge “armies” of followers, known as influencers, have also advertised cryptocurrencies through their accounts.
“Cryptocurrencies are often advertised next to these glamorous lifestyle posts, and I think the association is very dangerous and detrimental to young people,” Myron Jobson, financial adviser to Interactive Investor, told CNBC in October.
Regulatory framework and rules
He added that policymakers need to look at the issue of cryptocurrency ads and make sure that the ads explain to people the risks associated with investing in such a volatile asset. Their prices can record extreme volatility even within a day.
An additional issue for policy makers is that young people are very interested in this market and often make their first investments in cryptocurrencies, using loans and credit cards.
Figures released by the FCA in June showed that around 2.3 million people in the UK own cryptocurrencies. 14% of them use credit cards to buy them, while 12% believe they will have the “protection” of the FCA if something goes wrong, but the FCA has stated that it will not cover them.
Meanwhile, a poll of 1,000 UK adults aged 18 to 29 in July found that 27% of them used credit cards to invest in the dogecoin cryptocurrency, which was originally created as a joke in 17 % used their student loan for the same reason and 12% other types of loans.
This could be a double-edged sword, as investors could suffer losses due to their cryptocurrencies and then find it difficult to repay the loans and debts they have taken out in order to make these investments.
According to the IMF, national regulators should work to establish common rules globally, strengthen cross-border surveillance and, as such a new field, push for data standardization.
“Time is of the essence and action must be decisive, rapid and well-coordinated globally in order to highlight the benefits and, at the same time, address the vulnerabilities,” the IMF said in October.
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Source From: Capital
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