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IMF Sees New Challenges to monetary Stability From Crypto

The International Monetary Fund(IMF) warns that the rising quality of cryptocurrencies poses new challenges to monetary stability. “Cryptoization will cut back the flexibility of central banks to effectively implement financial policy. It might additionally produce monetary stability risks.”

The International Monetary Fund(IMF) warned concerning the risks exhibited by the cryptocurrency boom in an exceedingly  post printed on Friday. The post, titled “Crypto boom poses new challenges to financial stability,” is authored by 3 monetary consultants from the IMF’s Monetary and Capital Markets Department: Dimitris Drakopoulos, Fabio Natalucci, and Evan Papageorgiou.

Noting that “The total value of all the crypto assets surpassed $2 trillion as of Sept 2021 — a 10-fold increase since early 2020,” they mentioned that a lot of entities within the scheme “lack robust operational, governance, and risk practices.” These embody exchanges, wallets, miners, and stablecoin issuers.

The authors proceeded to debate “Consumer protection risks,” stating that they “remain substantial given restricted or inadequate revealing and oversight.”

They warned: “Looking ahead, widespread and fast adoption will cause important challenges by reinforcing dollarization forces within the economy — or during this case cryptoization — wherever residents begin to use crypto assets rather than the native currency.” The IMF consultants any described:

“Cryptoization will cut back the flexibility of central banks to effectively implement financial policy. It might additionally produce monetary stability risks.”

Moreover, they stated: “Threats to economic policy might additionally intensify, given the potential for crypto assets to facilitate tax  evasion. And fee (the profits accruing from the correct to issue currency) may additionally decline. Increased demand for crypto assets might additionally facilitate capital outflows that impact the interchange market.”

The authors additionally advised policy action. “As crypto assets take hold, regulators have to maximize,” they wrote.

“As a primary step, regulators and supervisors have to be ready to monitor fast developments within the crypto scheme and also the risks they produce by fleetly grappling data gaps,” they said. “The world nature of crypto assets means policymakers ought to enhance cross-border coordination to reduce the risks of restrictive arbitrage and guarantee effective oversight and enforcement.”

The IMF consultants suggested: “National regulators ought to additionally rank the implementation of existing global standards. Globally, policymakers should prioritize creating cross-border payments quicker, cheaper, and more clearly and comprehensively through the G20 Cross Border Payments Roadmap.” They concluded:

“Time is of the essence, and action must be decisive, swift and well-coordinated globally to permit the advantages to flow however, at a similar time, additionally address the vulnerabilities.”

Federal Reserve Chairman Powell Confirmed No Intention to Ban or Limit Use of Cryptocurrencies

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Federal Reserve Chairman Jerome Powell confirmed throughout a hearing before the House Financial Services Committee that he has no intention to ban or limit the use of cryptocurrencies. He additionally commented on the regulation of stablecoins.

Powell Says ‘No Intention to Ban’ Crypto

The chairman of the Board of Governors of the FRS System, Jerome Powell, talked regarding cryptocurrency, stablecoins, and central bank digital currencies (CBDC) throughout a hearing before the House Financial Services Committee Thursday. The most focus of the meeting, however, was the Federal Reserve’s and Treasury’s responses to the Covid-19 pandemic. Treasury Secretary Janet Yellen spoke for the executive department.

U.S. congresswoman Ted Budd from North Carolina said to Powell: “In a July hearing before this committee, you were asked regarding CBDCs or the Central Bank digital currencies and their impact on stablecoins and different cryptocurrencies, and you declared, ‘You wouldn’t need stablecoins, you wouldn’t need cryptocurrencies if you had a digital U.S. currency.’”

Rep. Budd continued:

So Mr. Chairman, as a matter of policy, is it your intention to ban or limit the use of cryptocurrencies like we are  seeing in China.

Powell straight off replied: “No.”

The Fed chairman quickly followed his reply with an admission that he “had misspoken” earlier once he affirmed, “you wouldn’t want cryptocurrencies.” Powell added “Take the word cryptocurrency out of that sentence.”

Rep. Budd felt that Powell’s answer relating to the forbidding of cryptocurrencies wasn’t clear enough thus he asked once more. “But, no intention to ban?” Powell confirmed that there’s no intention to ban crypto.

The Fed chair proceeded to speak regarding stablecoins, stating:

“Stablecoins are like money market funds. They’re like bank deposits however they’re to some extent outside the regulative parameter and it’s appropriate that they be regulated, same activity, same regulation.”

On Friday, the Wall Street Journal rumored that the Biden administration is seeking to manage stablecoin issuers as banks.

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 04.10.2021

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