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Top cryptocurrency news: IMF rules out crypto market threat to broader financial sector stability

27-Jul-2022 By: Simran Mishra
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The International Monetary Fund (IMF) has stated that the rise of cryptocurrencies does not pose a threat to global financial stability, adding that the current sell-off has dampened any concerns.

Indeed, the IMF stated on July 26 that major concern for the financial sector originates from factors such as the likelihood of a recession and excessive inflation, which has been expedited by events such as the Covid-19 lockdown and the conclusion of Russia's invasion of Ukraine.

The agency stated in a report that “the cryptocurrency market, which includes assets such as Bitcoin that are unrelated to traditional banks, should not be a source of worry.”

Contradicting stand on crypto threat 

The IMF's current stance on cryptocurrency runs counter to a report by the European Systemic Risk Board, which highlighted that the growing popularity of cryptocurrency posed considerable risks to the whole financial system.

According to the IMF, “the market correction in cryptocurrencies is limited and has had minimal influence on the wider financial sector.”

Recently, the correction has forced some businesses into bankruptcy, with lending platform Celsius leading the way. Factors like regulatory uncertainty, the high inflationary situation, and the Terra (LUNA) ecosystem catastrophe have all contributed to the crypto market meltdown.

Notably, the IMF has subsequently maintained a tough position on cryptocurrencies, cautioning governments against adopting digital currencies.

IMF changing view on cryptocurrencies

However, the body has since changed its stance on cryptocurrency. According to sources, the IMF believes that digital assets might be a viable alternative to traditional financial services.

Most specifically, the bank stated that some cryptocurrencies and CBDCs can be a more effective payment alternative than credit and debit cards.

According to the IMF, “CBDCs and other sorts of crypto assets, depending on how they are structured, can be more energy-efficient than most of the current payment landscape, including credit and debit cards.”

Lastly, IMF chief economist Gita Gopinath has previously indicated resistance to a blanket ban on cryptocurrencies while advocating for industry regulation.

Read also: IMF: Global Recession Cannot Be Ruled Out

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