IMF excludes crypto market threat to banking sector stability

The International Monetary Fund (IMF) has indicated that the emergence of cryptocurrencies does not threaten global financial stability, adding that the current sell-off has mitigated any worries.

According to a July 26 report by CoinDesk, the IMF suggested that significant concerns for the financial system stem from factors such as the possibility of a recession and high inflation, which have been exacerbated by events such as the Covid-19 lockdown and the outcome of Russia’s invasion of Ukraine.

In a study, the agency said that the cryptocurrency market, which includes assets such as Bitcoin decoupled from traditional institutions, poses no reason for alarm.

Contradictory position on the crypto menace

The IMF’s most recent position on cryptocurrencies contradicts a study by the European Systemic Risk Board, which cautioned that the expanding popularity of cryptocurrencies posed considerable risks to the whole financial industry.

According to the IMF, the cryptocurrency market correction has had little effect on the broader financial system.

Some firms have recently filed for bankruptcy due to the recent correction, with the lending platform Celsius leading the way. Regulatory uncertainty, a high inflationary climate, and the Terra (LUNA) ecosystem breakdown have all contributed to the crypto market fall.

Notably, the IMF has maintained a challenging position on cryptocurrencies, advising nations against adopting them.

IMF shifts position on cryptocurrencies

However, the organisation seems to have suddenly changed its stance on cryptocurrency. The IMF said, as reported by Finbold, that digital assets might be a viable alternative to conventional financial goods.

In particular, the organisation emphasised that some cryptocurrencies and central bank digital currencies (CBDCs) might be a more efficient payment option than credit and debit cards.

The IMF said that, depending on how they are structured, CBDCs and some crypto assets might be more energy-efficient than most of the existing payment landscape, including credit and debit cards.

In the past, Gita Gopinath, the top economist of the International Monetary Fund, opposed a blanket ban on cryptocurrencies but advocated for the industry to be regulated.

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