The International Monetary Fund (IMF) is warning investors that the cryptocurrency rise this year may jeopardize their monetary sustainability.
The IMF notes in a new blog post that, despite the industry’s exponential growth since 2020, investors may still fall victim to counterfeit crypto assets or abandoned projects, as the digital asset market remains mostly uncontrolled.
“Consumer protection risks continue to be significant as a result of limited or insufficient disclosure and oversight. For instance, over 16,000 tokens have been listed on various exchanges, and approximately 9,000 remain, while the remainder has vanished in some way.
For instance, many of them lack volumes or the developers abandoned the project. Some were almost certainly fabricated merely for speculation or outright fraud.”
Additionally, the IMF notes that an acceleration in crypto adoption could have an effect on a country’s central bank’s power to influence monetary policy.
“In the future, widespread and quick adoption may pose substantial issues by increasing dollarization tendencies in the economy – or, in this case, cryptoization, in which inhabitants begin using crypto assets in place of local currency.
Cryptocurrency can impair central banks’ ability to conduct effective monetary policy. It may also jeopardize financial stability, for example, by introducing funding and solvency problems as a result of currency mismatches.”
Additionally, the IMF warns that cryptocurrencies can be used to evade taxes and have the potential to reduce government income from currency issuance.
“Threats to fiscal policy may also rise since crypto-assets have the potential to aid tax evasion. Additionally, seigniorage (earnings derived from the privilege to issue currency) may decline. Increased demand for crypto-assets may also assist capital outflows, which could have an effect on the foreign currency market.”
Also Read: Gary Gensler Warns That The $2 Trillion Crypto Market Will Not Survive If It Is Not Regulated
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