IMF Warns of Contagion Risks to Global Finance From Stablecoins

Vulnerable to hacks, lacking transparency in the issuance and distribution of tokens, and with potential outages due to the high volatility of cryptocurrencies, particularly stablecoins, they pose risks to the global economy. Such conclusions appear in the the report IMF.

Analysts emphasised that the threats at present are ‘limited in nature’.

Regulators in developing countries must not miss the opportunity to maintain oversight of cryptocurrencies, given the absence of an adequate regulatory framework in most jurisdictions. The growing popularity of cryptocurrencies and stablecoins could jeopardise macroeconomic and financial stability, the report says.

As the crypto space expands and develops, ‘new sources of risk’: stablecoins (due to opacity of their collateral and the risks of banking panic) and DeFi.

IMF experts also cited meme tokens, Binance’s dominance among centralised exchanges, and Tether among stablecoins as factors for consideration.

The organisation urged the development of ‘global standards for crypto assets’ to prevent ‘contagion risk’ to other markets.

“As the cryptocurrency market’s capitalization grows, the significance of such risks for macroeconomics is likely to increase,” the experts explained.

Earlier in October, the IMF said that regulation of the crypto industry should be tightened.

The IMF previously criticised the legalization of Bitcoin in El Salvador. In the IMF’s view, this decision could lead to a number of risks and regulatory issues.

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