IMF Official Brands Crypto’s Intense Volatility A Significant Economical Threat

Tobias Adrian, the financial counselor to the International Monetary Fund (IMF), warns that the price volatility of cryptocurrencies is causing harm to emerging economies. The warning is coming after the international organization sounded that crypto prices were a threat to the financial stability of economies as they were beginning to show a high correlation with stocks. The IMF also recently urged El Salvador to stop using Bitcoin as legal tender.

A senior official at the IMF warns that crypto volatility is destabilizing small countries

The International Monetary Fund (IMF) is continuing its campaign against crypto adoption. Speaking in an interview with Financial Times, Tobias Adrian, director of the IMF’s monetary and capital markets department, stated that the use of cryptocurrencies in emerging markets posed a noteworthy threat to their financial stability. This is because cryptocurrencies are being used to take out money from these economies he asserts.

Crypto is being used to take money out of countries that are regarded as unstable [by some external investors]. It is a big challenge for policymakers in some countries, Adrian told the Financial Times.

Not only that, Adrian, who is the financial counselor of the IMF, added that emerging economies were facing “immediate and acute risks” as they were seeing their currencies being replaced by unregulated crypto assets. The senior official advises that there should be concerted efforts to regulate cryptocurrencies and curtail the threat they posed.

Amidst the IMF’s warnings, speculation is only growing that more countries will adopt crypto

The latest view from the IMF staff is coming after the organization has sounded several similar warnings recently. In a research report, the IMF noted that crypto, especially Bitcoin, could no longer be considered a reliable inflation hedge as it has been trading with greater correlation with traditional assets. The report opined that if the crypto industry is not regulated with some urgency, there could be a contagion of volatility spreading from the crypto market to the stock market, leading to financial instability.

Similarly, the IMF advised El Salvador to at the minimum downgrade Bitcoin from being legal tender not long ago. In a note written by the organization’s staff, it recommended that the country should regulate Bitcoin more strictly to safeguard financial stability.

El Salvador’s president, Nayib Bukele, seems to have brushed off the recommendation in his response. Whether other emerging economies will pay heed to the organization is yet to be seen, but there are speculations that more countries will adopt crypto, and Bitcoin in particular, as legal tender.