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IMF Cautions Rapid Crypto Adoption Presents Challenges to Investors’ Financial Stability

The International Monetary Fund (IMF) opines that the rapid growth of digital assets may present risks to investors’ financial stability. The IMF stated that despite the explosive growth in the crypto space within the last few months, there should be caution. The leading monetary institution said that investors may still fall victim to several schemes. These include fraudulent crypto assets or discontinued projects especially since the crypto space still lacks proper regulation. An official statement from the IMF read:

“Consumer protection risks remain substantial given limited or inadequate disclosure and oversight. For example, more than 16,000 tokens have been listed in various exchanges and around 9,000 exist today, while the rest have disappeared in some form.”

The IMF continued by noting that some of these projects were even created solely to draw in interest and funds. Upon realization of their objectives, they cease to exist, or the developers walk away from the project.

The IMF also believes that the fast rate of crypto adoption impedes a central bank’s ability to influence monetary policy.

“Cryptoization can reduce the ability of central banks to effectively implement monetary policy. It could also create financial stability risks, for example through funding and solvency risks arising from currency mismatches.”

According to the IMF, digital assets can facilitate tax evasion and decrease government profits earned from issuing currency.  

Image Credits: Pixabay

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 05.10.2021

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