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The head of the International Monetary Fund (IMF) called for crypto regulations as they pose risks to financial stability.
Kristalina Georgieva, the managing director of the IMF, spoke at a conference in Seoul on digital currencies this week. In her opening speech, Georgieva said cryptocurrencies needed to be regulated as they may pose risks to financial stability.
IMF Warns of Risks Associated with Crypto
Georgieva explained that crypto is not something that is going away, but it needs to be addressed.
“For one, crypto assets are not going away. Bitcoin is trading at its highest value since April 2022. The crypto market cap doubled over the last year. And still today people search for the word “Bitcoin” about 20 times more than “health and wellness,” and 7 times more than “climate change,” she stated.
In light of crypto’s likely permanence, Georgieva highlighted the risk that widespread adoption could pose.She also noted high crypto adoption levels among emerging market economies such as India, Nigeria, and Vietnam.
According to the IMF’s chief:
“The challenge is that high crypto asset adoption could undermine macro-financial stability.”
Reuters reported that Georgieva further said high crypto asset adoption could affect monetary policy transmission, capital flow management measures and discal sustainability due to uncertain tax collection.
In her speech, Georgieva explained the reasoning behind implementing clear crypto regulations.
“Our goal is to make a more efficient, interoperable, and accessible financial system by providing rules to avoid the risks of crypto and infrastructure by leveraging some of its technologies.”
She continued that rules are not meant to “return us to a pre-crypto world, nor to squash innovation.” Adding, “Good rules can spur and guide innovation.”
Acknowledgement That Crypto Is Not Going Away
As Georgieva said in her speech, crypto assets are not going away. Her statement underscored that of the IMF. In February, the IMF issued a press release discussing what it calls Elements of Effective Policies for Crypto Assets,” in which it said despite the recent downturn, crypto assets may continue to evolve, and doing nothing is untenable.
“Efforts to put in place effective policies for crypto assets have become a key policy priority for authorities amid the failure of various exchanges and other actors within the crypto ecosystem, as well as the collapse of certain crypto assets. Doing nothing is untenable as crypto assets may continue to evolve despite the current downturn,” the IMF said.
