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IMF rules out crypto market threat to broader financial sector stability

The International Monetary Fund (IMF) has stated that the growth of cryptocurrencies does not threaten global financial stability while noting that the recent sell-off has slowed down any concerns.

Indeed, the IMF suggested that significant concern for the financial system stems from factors like the possibility of a recession and high inflation, which has accelerated by occurrences like the Covid-19 lockdown and the outcome of Russia’s invasion of Ukraine, CoinDesk reported on July 26.

In a report, the agency noted that the cryptocurrency market with assets like Bitcoin that are delinked from conventional banks, should not be cause for concern.

Contradicting stand on crypto threat 

The IMF’s latest stand on crypto contradicts a report by the European Systemic Risk Board that warned that the rising popularity of crypto poses significant risks to the general financial market

According to the IMF, the market correction in cryptocurrencies is limited and has not impacted the general finance sector. 

Recently, the correction has plunged some businesses into bankruptcy, with lending platform Celsius leading the way. The crypto market meltdown has been driven by factors like regulatory uncertainty, the high inflationary environment, and the Terra (LUNA) ecosystem crash. 

Notably, the IMF has since maintained a hard stance on cryptocurrencies warning countries against adopting digital currencies. 

IMF changing view on cryptocurrencies

However, the body has recently appeared to change its view of cryptocurrencies. As reported by Finbold, the IMF noted that digital assets could be an effective alternative to traditional finance products. 

Most specifically, the institution pointed out that select cryptocurrencies and central bank digital currencies (CBDCs) can be a more effective payment solution than credit and debit cards. 

“Depending on the specific details of how they are configured, CBDCs and some kinds of crypto assets can be more energy-efficient than much of the current payment landscape, including credit and debit cards,” the IMF said. 

Finally, in the past, IMF chief economist Gita Gopinath had expressed opposition to a blanket ban on cryptocurrencies but called for regulation of the sector.

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