IMF Warns From the Unregulated Cryptocurrency Boom


Kristalina Georgieva, the managing director of the International Monetary Fund (IMF), stated that it is hard to believe in Bitcoin and other cryptocurrencies as real money

At an event in Italy, the official stated the central bank digital currencies (CBDC) is the most reliable form of digital money.

She also called virtual currencies “de facto assets” since they are not backed by assets that allow price stability, according to a Reuters report.

“In the history of money, it is difficult to think of them as money,” Georgieva noted. Still, she noted that lawmakers should evaluate the problem of digital currencies to verify if they can be considered a reliable medium of exchange.

IMF Is Also Concerned About Global Fiscal Policies

Also, Georgieva said that Europe was fitter to avoid another debt crisis such as the one faced by Greece in the aftermath of the global financial crisis of 2007–08.

But she said countries would have to plan carefully how to shift course to medium-term fiscal consolidation to erase the increased pandemic-related debt burden.

Georgieva said that 110 countries among the IMF membership are at some stage of looking into central bank digital currencies, and a key challenge was how to guarantee interoperability of digital currencies.

It is “very impressive how much the international community, the central banks, institutions like ours are now actively engaged to make sure that in this fast-moving world of digitalization, money is a source of confidence and helps the economy function rather than (being) a risk.”

IMF Warns From the Unregulated Cryptocurrency Boom

In 2019 the World Bank and the IMF joined forces to launch ‘Learning Coin’ with their private blockchain. The coin has been created as a tool for the IMF and the World Bank to better understand blockchain technology and how cryptocurrencies can be used.

However, the IMF has said tougher regulation is needed to prevent the rapid growth in cryptocurrencies leading to financial instability, defrauding of consumers, and the funding of terrorism.

The Washington-based IMF said the 10-fold increase in the market value of crypto assets – digital or virtual currencies – to more than $2tn since early 2020 required more active and collaborative supervision by governments.

In a chapter from its forthcoming Global Financial Stability Report, the IMF said many of the new cryptocurrencies lacked robust governance and risk practices.

The IMF also highlighted potential problems with the four-fold increase in the supply of stable coins – cryptocurrencies that aim to peg their value, usually against the US dollar – to $120bn (£88bn) during 2021.

 

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