Global crypto adoption has led to the release of new policies by the International Monetary Fund (IMF) to ensure financial stability in emerging markets.
Despite bearish trends since May 2021, the IMF sees crypto assets as a potential tool for faster and cheaper cross-border payments, citing the dramatic rise in the value of the crypto markets. Crypto adoption is attributed to high returns, lower transaction costs and speed, and reduced Anti-Money Laundering (AML) standards, according to the report.
Due to the increased trading of crypto assets, IMF recommends these steps to counter the financial stability challenges.
It is imperative that policymakers establish global standards for crypto assets and improve their monitoring of the crypto ecosystem by closing the data gaps. As emerging markets grapple with crypto risks, macroeconomic policies need to be strengthened, and central banks should consider issuance of digital currencies.
According to the IMF report, crypto market valuations have expanded beyond Bitcoin (BTC) and stablecoins have risen dramatically. Three years of IMF data suggests Bitcoin and other non-stablecoin crypto assets have risk-adjusted returns comparable to mainstream benchmarks such as the S&P 500.
The IMF also recommends “fair regulation of digital currencies and de-dollarization policies, which will help countries protect themselves against macro-financial risks.” In addition to the implementation of CBDCs, the IMF also suggests “proportionate regulatory measures based on risk.”
The IMF announced in July 2021 that it would “step up” its monitoring of digital currencies. An IMF report from several years ago said payments would become cheaper, faster, easier, and more accessible as a result of the adoption of digital assets. Improvements in these areas would have substantial positive impacts overall.
As part of the IMF’s discussions on mainstream Bitcoin adoption, the Fund has also scheduled a meeting with Salvadoran President Nayib Bukele.
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