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IMF Report: Stablecoins Possible 'Contagion Risk' To Financial System

IMF Report: Stablecoins Possible 'Contagion Risk' To Financial System

International Monetary Fund (IMF) joins the growing list of institutions that warn about the risks to the global financial system posed by the growing adoption of 'stablecoins.'

IMF writes in its 2021 Global Financial Stability Report, that crypto doesn’t yet present a systemic threat to the international system but that “risks should be closely monitored given the global implications and the inadequate operational and regulatory frameworks in most jurisdictions.”

The entity suggests “global standards for crypto assets,” in order to address the inadequacies, which might help fend off a “contagion risk” to other markets.

The IMF is a finance heavy-weight – an intergovernmental body of 190 member states that promotes global trade, poverty reduction, and stable monetary policies. According to an April 2021 fact sheet, it has about $1 trillion available for loans (to its members who agree to the lean terms), a little under half of the total crypto market capitalization.

A chapter in this year’s report titled “COVID-19, Crypto, and Climate: Navigating Challenging Transitions” reflects the IMF’s point of view by putting the digital assets in the same basket with a pandemic and a potential catastrophe. Despite the title, the report itself is more balanced, and talks about “both opportunities and challenges” arising from digital assets’ growth.

The report cites service disruptions on exchanges, attacks to centralized platforms on which crypto is still dependent, and low transparency around the issuance and distributions of some tokens. It reads:

“The rapid growth of the ecosystem has been accompanied by the entrance of new entities, some of which have poor operational, cyber risk management, and governance frameworks.”

Read the full article at Fintechs.fi

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