The International Monetary Fund (IMF) is issuing a warning to investors that this year’s crypto boom may pose risks to their financial stability.
In a new blog post, the IMF says that even though the industry has grown tenfold since 2020, investors may still succumb to fraudulent crypto assets or abandoned projects as the digital asset market is still largely unregulated.
“Consumer protection risks remain substantial given limited or inadequate disclosure and oversight. For example, more than 16,000 tokens have been listed in various exchanges and around 9,000 exist today, while the rest have disappeared in some form.
For example, many of them have no volumes or the developers have walked away from the project. Some were likely created solely for speculation purposes or even outright fraud.”
The IMF adds that an accelerated pace of crypto adoption could impact the ability of a nation’s central bank to influence monetary policy.
“Looking ahead, widespread and rapid adoption can pose significant challenges by reinforcing dollarization forces in the economy – or in this case cryptoization – where residents start using crypto assets instead of the local currency.
Cryptoization can reduce the ability of central banks to effectively implement monetary policy. It could also create financial stability risks, for example through funding and solvency risks arising from currency mismatches.”
The IMF also warns that cryptocurrencies can be used to dodge taxes and also have the potential to decrease government profits earned from issuing currency.
“Threats to fiscal policy could also intensify, given the potential for crypto assets to facilitate tax evasion. And seigniorage (the profits accruing from the right to issue currency) may also decline. Increased demand for crypto assets could also facilitate capital outflows that impact the foreign exchange market.”Don't Miss a Beat – Subscribe to get email alerts delivered directly to your inbox
Check Price Action
Follow us on Twitter, Facebook and Telegram
Surf The Daily Hodl Mix
Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Featured Image: Shutterstock/ddmirt