Volatility in digital assets destabilises capital flows in developing markets, and their use as a substitute for fiat is associated with high risks. This view was voiced by Tobias Adrian, director of the IMF‘s Monetary and Capital Markets Department, in an interview with the FT.
“Cryptocurrencies are used to move capital out of countries deemed unstable by certain external investors. This is a major problem for policymakers in some states,” he said.
The IMF official spoke of the need to adjust controls on monetary flows to take account of new technologies. He also noted an increase in the correlation between cryptocurrencies and the stock market.
The IMF called on national and global regulators to develop a common approach to supervising digital assets.
“We cannot simply ignore this. Global rules are never swift to implement. But if we start now, we can support financial stability and reap the benefits of technological innovation,” Adrian said.
In January, the IMF’s Executive Board recommended that El Salvador abandon Bitcoin as legal tender and reminded of the risks to financial stability.
In December 2021, the IMF urged choosing regulation over banning digital assets. The IMF noted that in the event of repression, countries would lose control over the crypto industry.
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