LONDON
\nSharp price swings in cryptocurrencies are causing \u201cdestabilising\u201d capital flows in emerging markets, and the use of crypto in place of traditional currencies poses \u201cimmediate and acute risks\u201d, according to a senior official at the IMF.
\n\u201cCrypto is being used to take money out of countries that are regarded as unstable [by some external investors],\u201d said Tobias Adrian, the IMF\u2019s financial counsellor and head of its monetary and capital markets department.
\n\u201cIt is a big challenge for policymakers in some countries,\u201d Adrian said in an interview with the Financial Times, noting that \u201ccryptocurrency markets have lost about $1tn in value since the peak\u201d.
\nThe IMF last week urged El Salvador to stop recognising bitcoin as legal tender, reiterating its warning that official adoption of the digital asset last year presented \u201clarge risks\u201d for the stability and integrity of the country\u2019s financial system. Nayib Bukele, the president of El Salvador \u2014 which is seeking more than $1bn in financing from the IMF \u2014 plans to raise money by selling bonds linked to the world\u2019s biggest cryptocurrency. The scheme has drawn criticism from some of the international investors that own debt already issued by the government.
\nAdrian said some emerging markets and developing economies now faced \u201cimmediate and acute risks\u201d as a result of their existing established currencies being replaced by crypto assets, a process that has been dubbed \u201ccryptoisation\u201d.
\n\u201cCapital flow management measures will need to be fine-tuned in the face of cryptoisation,\u201d said Adrian. \u201cApplying established regulatory tools to manage capital flows may be more challenging when value is transmitted through new instruments, new channels and new service providers that are not regulated entities.\u201d
\nSigns of closer correlation between the performance of cryptocurrencies and other financial assets in developed countries, such as US technology stocks, government bonds and even crude oil are also troubling the IMF.
\nOfficials at the Washington-based fund believe that sharp deleveraging episodes in cryptocurrencies are feeding into sell-offs in equity markets. \u201cThe correlation between crypto and equity markets has been trending up strongly. Crypto is now very closely tied to what is happening in equities.
\nWe can\u2019t just dismiss it,\u201d said Adrian.
\nThe IMF has urged national and global regulators to establish a co-ordinated, consistent and comprehensive approach to supervising cryptocurrencies \u2014 a daunting task, given the speed at which digital assets are moving into mainstream finance. \u201cAgreeing global regulations is never quick. But if we start now, we can achieve the goal of maintaining financial stability while also enjoying the benefits which the underlying technological innovations bring,\u201d said Adrian.<\/p>\n","protected":false},"excerpt":{"rendered":"
LONDON Sharp price swings in cryptocurrencies are causing \u201cdestabilising\u201d capital flows in emerging markets, and the use of crypto in place of traditional currencies poses \u201cimmediate and acute risks\u201d, according to a senior official at the IMF. \u201cCrypto is being used to take money out of countries that are regarded as unstable [by some external […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":{"0":"post-241922","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-business"},"yoast_head":"\n