The IMF believes in the potential of crypto assets as a tool for faster and cheaper cross-border payments and points to a strong appreciation of the crypto market despite the downward trend since May 2021. The report cites high profitability, transaction costs and speed and reduced standards to combat the Money laundering (AML) as key factors for the introduction of cryptocurrencies.
In response to the challenges of financial stability due to increased trading in crypto assets, the IMF recommends:
“Policy makers should implement global standards for crypto assets and strengthen oversight of the crypto ecosystem by addressing data vulnerabilities. Emerging markets facing cryptocurrency risk should step up macroeconomic policies and weigh the benefits of issuing central bank digital currencies. “
The IMF report shows that crypto market valuations have expanded beyond Bitcoin (BTC), along with a sharp surge in stablecoin supply. Three-year IMF data shows risk-adjusted returns for volatile crypto assets like Bitcoin that are comparable to other mainstream benchmarks like the S&P 500, as shown in the following figure:
In addition to the CDBC issue, the IMF recommends adding “a regulation appropriate to the risks and in line with the regulation of global stablecoins”. In addition to implementing CBDCs, de-dollarization policies will help governments manage macro-financial risks.
Related: IMF Intends To “Strengthen” Cryptocurrency Supervision
As early as July 2021, Cointelegraph reported on the IMF’s plan to “step up” supervision of digital currencies. A previous IMF report highlighted the benefits of digital assets, suggesting that “Payments will become easier, faster, cheaper, more accessible and will quickly cross borders”. These improvements can drive efficiency and inclusion, with key benefits for all. “
The IMF had also previously scheduled a meeting with Salvadoran President Nayib Bukele to discuss the implications and the possibility of Bitcoin being adopted by the mainstream.