Digital Currency Growth Brings “Opportunities and Challenges”: IMF
A recent report by the International Monetary Fund (IMF) has highlighted that the current evolution in the digital currency ecosystem presents both opportunities and challenges for the broader financial ecosystem.
According to the report, the IMF pointed out the potential advantages that may emanate from the growing adoption of digital currencies, including the boost to financial inclusion.
The IMF report detailed:
“The rapid growth of the crypto ecosystem presents new opportunities. Technological innovation is ushering in a new era that makes payments and other financial services cheaper, faster, more accessible, and allows them to flow across borders swiftly. Crypto asset technologies have potential as a tool for faster and cheaper cross-border payments,”
The international monetary watchdog also noted that bank deposits can be transformed into “stablecoins that allow instant access to a vast array of financial products from digital platforms and allow instant currency conversion.” The broad innovation powering digital currencies is also known to power flexible utilities in the form of decentralized finance that can potentially transform the monetary ecosystem.
The IMF also pointed out the inherent risks involved in crypto adoption, dwelling on the limited framework to provide the necessary investor protection.
“Challenges posed by the crypto ecosystem include operational and financial integrity risks from crypto asset providers, investor protection risks for crypto-assets and DeFi, and inadequate reserves and disclosure for some stablecoins,” the report noted.
Providing recommendations to tame the flaws that are observable in the fast-emerging cryptocurrency industry pose, the IMF suggests the creation of enhanced monitoring systems for protocols operating under their jurisdictions.
“Policymakers should implement global standards for crypto-assets and enhance their ability to monitor the crypto ecosystem by addressing data gaps. As the role of stablecoins grows, regulations should correspond to the risks they pose and the economic functions they perform. Emerging markets faced with cryptoization risks should strengthen macroeconomic policies and consider the benefits of issuing central bank digital currencies,” the report said.
Crypto regulation is a volatile and diverse affair amongst various countries nowadays. While South Korea is intensifying its demands from crypto exchanges operating in the country, others particularly China are stumping out any digital currency-related activity in a sweeping regulatory stance.
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