According to reports, the IMF said the widespread popularity of crypto is not a threat to the stability of the global financial market. However, it stated the latest sell-off had reduced the possibility of such concerns.
As stated by the IMF, certain factors are responsible for such remarks on the crypto sector. Policymakers fear crypto could cause a global recession and increased inflation.
However, the Russia-Ukraine war and the Covid-19 pandemic have led to a global recession. According to the agency, crypto assets such as BTC are not linked to conventional banks. Hence, they are no threat.
The ESRB Believes Crypto Poses Great Financial Threat
The latest notion of the IMF toward crypto goes against the European Systemic Risk Board (ESRB) report. The report cautioned that crypto’s increasing popularity poses a great risk to the financial market.
Meanwhile, the financial institution believes the ongoing crypto market correction is limited. That means it cannot affect the international financial sector.
Besides, the ongoing correction has caused several crypto firms to go bankrupt. The lending platform Celsius Network leads the way in the latest bankruptcy issue.
Also, several factors have caused the cryptocurrency market to decline. They include regulatory uncertainty, increased inflation, and the crash of Terra’s ecosystem.
As a result of the crash, the IMF warned countries not to adopt digital currencies. This is due to their high instability. It even attacked El Salvador and the Central African Republic for legalizing BTC.
IMF Changes Stance On Crypto
Before now, the monetary organization has not been in total support of the crypto industry. However, it appears the IMF has taken a different stance on crypto.
According to Finbold, the organization has acknowledged the effectiveness of crypto as a substitute for conventional finance products.
Particularly, the IMF noted that some cryptocurrencies and CBDCs could be used for payment. It called crypto a good payment solution compared to debit and credit cards.
“Some digital assets and CBDCs can become more energy-efficient compared to the present payment options. However, this depends on how their method of configuration,” IMF added.
Also, the Chief Economist of the IMF, Gita Gopinath, objected to the total ban of cryptocurrency. Gopinath believed it is better to regulate the crypto sector than ban it.
Meanwhile, several countries and regions have been gearing up to regulate the crypto sector. The EU has been working on the MiCA bill, which it will release before the end of the year.