IMF proposes a methodology for assessing crypto-related risks

IMF in working paper presented an analysis of vulnerabilities and potential supervisory responses for the digital-asset sector.

In the document, experts proposed a crypto-risk assessment matrix (C-RAM) to identify indicators and triggers of potential threats in the industry. The instrument is also intended to generalize possible regulator responses to the identified problems.

The matrix envisages a three-stage approach:

• The first step involves using a decision tree to assess the potential macroeconomic impact;
• The next step involves studying indicators comparable to those used to monitor TradFi;
• The last step covers global macrofinancial risks that influence the assessment of systemic threats.

As an example, the authors applied the C-RAM to El Salvador. They concluded that the legalization of Bitcoin created market risks, liquidity risks and regulatory risks.

“The impact can be assessed as critical, since the decision has entailed a threat of substantial ‘cryptoisation’ in the country, undermining financial stability and affecting large money transfers and other capital inflows,” — the document says.

Earlier, IMF staff acknowledged that the risks of Bitcoin legalization in El Salvador “did not materialize” due to the “limited” spread of digital assets. IMF staff have repeatedly criticised the authorities’ decision.

In September, G20 member countries approved recommendations by the Financial Stability Board and the IMF on the regulation, supervision and oversight of cryptocurrencies.