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Growing cryptocurrency adoption poses risk to global economy – IMF

The International Monetary Fund has said the growing adoption of cryptocurrencies pose risks to the global economy.

The IMF said this in its ‘Global Financial Stability’ report released on Tuesday.

It said the adoption of crypto assets and stablecoins in emerging markets and developing economies could pose a challenge to those countries’ macroeconomic and financial stability.

According to the fund, while the risks are contained for now, regulators have to monitor cryptocurrencies to keep them in check.

“As the crypto ecosystem expands and evolves, new sources of risk will emerge such as stablecoins and decentralised finance,” it said.

The IMF said the risks included hacking, lack of transparency around issuance and distribution of tokens, and operational risks including outages during periods of extreme volatility.

It added that ‘meme tokens’ and centralisations were also factors to consider.

The IMF said, “So far, losses as a result of such risks have not had a significant impact on financial stability, globally or domestically. However, as crypto assets grow, the macro-criticality of such risks is likely to increase.”

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“The crypto ecosystem continues its rapid growth presenting new opportunities and challenges. Crypto asset exchanges pose several operational and financial integrity risks through their cross-border operations.

“Investor protection risks loom large for crypto assets and decentralised finance. For example, stablecoins have generally poor disclosures and can be subject to runs if their reserves come into question.”

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The IMF said in emerging markets, the advent of crypto assets might be accelerating dollarisation and eroding the effectiveness of existing exchange restrictions and capital control management measures.

It said increased trading of crypto assets by emerging market users could potentially lead to destabilising capital flows.

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