Crypto may displace Naira and other emerging markets, IMF says.
On Thursday, the IMF released a report titled “Global Crypto Regulation Should Be Comprehensive, Consistent, and Coordinated.”
The IMF claimed in its report that it handles maintaining the global financial and monetary system’s stability.
Cryptoassets, according to the International Monetary Fund, represent immediate and much hazards to various emerging market and developing economy currencies, including the Nigerian naira.
Capital flow management following “cryptoisation” will need fine-tuning. This is because managing capital flows using existing regulatory mechanisms can be difficult, especially when moving value utilizes unregulated instruments, channels, and service providers.”
Between July 2020 and June 2021, a total of $1 million was spent, and 05.6 billion in crypto assets were moved. This translates to a 1,200% rise in value. Africa tops peer-to-peer (P2P) payment platforms in terms of transaction volume across all regions.
Crypto will displace Naira and crypto assets will cause systemic financial instability in some nations, according to the IMF, as policymakers struggle to control risks. It went on to say that a crypto asset was disrupting the entire financial system that the organization wanted to defend.
Some of these financial stability threats, it believes, may become systemic in some nations very soon.
“In a market characterized by stretched valuations, the approximately $2.55 trillion market capitalization may reflect froth in addition to the value of underlying technology advancements such as blockchain,” the research concluded.
Identifying, monitoring, and managing crypto-related risks is tough for regulators and businesses, according to the international fund.
“These dangers emphasize why we need comprehensive international regulations that manage the risks that crypto-assets, their associated ecosystems, and related transactions pose to the financial system while allowing the development of useful crypto assets and applications,” according to the IMF.
“Countries adopt varied tactics,” the organization stated in a statement, “and existing laws and regulations may not be able to cover all elements of these assets at the national level.”
According to the IMF, global regulatory frameworks that provide level playing fields across the activity and risk spectrum are required.
It’s critical to clearly define license and authorization standards, as well as the authorities responsible for them, and the systems in place to coordinate their actions. The standards for crypto assets and stablecoins should be adapted to their primary use cases.
There is a compelling need for cross-border collaboration and cooperation to address technological, legal, regulatory, and supervisory concerns.
Crypto-assets, according to the research, have the ability to fundamentally alter international monetary and financial systems.