- The second chapter to IMF’s Global Financial Stability Report focused on crypto adoption.
- It outlines the risk related to this year’s crypto boom.
The International Monetary Fund released the second chapter to its Global Financial Stability Report for October 2021. In the report, the financial body explained the recent crypto adoption and explosion.
In the report, the firm recognized that as the crypto market surged beyond the market capitalization of $2 trillion, an entirely new asset ecosystem was formed. This ecosystem includes wallets, exchanges, and various trading technologies and tactics.
“Consumer protection risks remain substantial given limited or inadequate disclosure and oversight.”The Global Financial Report
The report outlined several challenges that are faced by regulators as well as investors amidst this year’s crypto adoption and expansion.
Crypto adoption poses multiple risks
According to the report, crypto adoption jas brought a lot of issues with it. This includes the lack of transparency and oversight of tokens. It was noted that around 16,000 tokens were listed on different cryptocurrency exchanges. But after a while, only 9,000 of these tokens remain.
It was seen that most of these tokens got shut down because of lack of volumes, or the shut down of the entire project. Looking deeper into the matter, the report showed that many crypto projects were introduced to scam users.
Further analysis of crypto adoption brought the lack of transparency in crypto payments enables their usage in illicit activities. These include the promotion of terrorism and money laundering as well through crypto payment channels.
The report also pointed out that due to the surge in crypto adoption across different countries, each nation is building its own laws regarding crypto payments. This makes the coordination of payment channels more difficult around the world.
Suggestions for regulators
The rapid advancement of crypto adoption and the issues created by them need to be monitored by the monetary authorities. This can be done by filling in the data gaps created by rapid adoption.
Furthermore, the report emphasizes the adoption of a global standard for crypto payments. This means that every nation would benefit from following a similar financial model.
The report mentioned that crypto adoption became popular in certain nations because of a lack of proper banking systems. Therefore, such a poor monetary system should be improved upon using CBDCs and the introduction of better laws.