While the cryptocurrency boom has opened up possibilities for businesses and business, many people are wary about its future. Most countries and their central banks are concerned about the disruption allowing cryptocurrency as legal tender will cause their economies. Nevertheless, the crypto market is growing rapidly as people enter it in large numbers mainly to book profits while the bull run remains. The International Monetary Fund (IMF) and the World Bank have also often questioned the viability of this opaque market.
In its latest Global Financial Stability Report, the IMF has called for stricter regulations to curb rapid growth in cryptocurrencies, which it says could lead to financial instability, consumer fraud and terrorism financing. . The report highlighted the hacking risks of crypto trading due to its digital nature. “So far, these events have not had a significant impact on financial stability. However, as crypto assets become more mainstream, their importance is set to increase in terms of potential impacts to the broader economy,” the report’s authors said in a blog.
He also pointed to inadequate disclosure and oversight on the industry, saying that some currencies were probably created for the sole purpose of speculation or fraud. The authors said that the anonymity of crypto assets creates data gaps for regulators and can even contribute to money laundering.
Meanwhile, the World Bank has clarified its preference for central bank digital currencies (CBDCs) rather than privately held cryptocurrencies. It has said that CBDCs can facilitate cross-border transactions and significantly improve the international payment system. When El Salvador granted legal tender status to bitcoin, the international lender declined its request for assistance with the rollout due to “lack of environmental and transparency”.
While many countries are considering launching their own CBDCs, there are still many unanswered questions about how existing infrastructure will coexist with new ones, how monetary policy will be affected and the role the private sector will play in its adoption. . .