UAE

Life and Living

World

Opinion

Business

Sports

Entertainment

Lifestyle

Travel

Reviews

Brands

Supplements

KT Events

KT APPDOWNLOAD

Type your keywords

Markets face ‘acute risks’ due to Crypto: IMF

Crypto has become a big challenge for policymakers in some countries, noting that traditional capital management measures will have to be fine-tuned in the face of 'cryptoisation'

Read more...
Last week, Bitcoin tumbled almost nine per cent to its lowest in six months as fears of a Russian attack on Ukraine saw riskier assets worldwide extend their sell-off. — File photo
by

Issac John

Published: Wed 2 Feb 2022, 5:51 PM

Volatile crypto assets for global capital flows could create immediate and acute risks across emerging markets, an International Monetary Fund official has warned.

Tobias Adrian, a financial counselor and head of the monetary and capital markets department at the IMF, made the comments following the Fund’s recent plea to El Salvador to drop Bitcoin as legal tender. The IMF has repeatedly criticized El Salvador’s Bitcoin policy since it introduced the asset as an official currency last September.

Advertising
Advertising

“Crypto is being used to take money out of countries that are regarded as unstable,” he said.

Adrian said crypto has become a big challenge for policymakers in some countries, noting that traditional capital management measures will have to be fine-tuned in the face of “cryptoisation.”

He observed that applying established regulatory tools to manage capital flows may be more challenging when value is transmitted through new instruments, new channels, and new service providers that are not regulated entities.

The Bank of England also has warned that bitcoin could be “worthless” and people investing in the digital currency should be prepared to lose everything.

In a warning over the potential risks for investors, the British central bank questioned whether there was any inherent worth in the most prominent digital currency.

The deputy governor of the Bank of England, Sir Jon Cunliffe, said the bank had to be ready for risks linked to the rise of the crypto asset following rapid growth in its popularity. “Their price can vary quite considerably and [bitcoins] could theoretically or practically drop to zero.”

Last week, Bitcoin tumbled almost nine per cent to its lowest in six months as fears of a Russian attack on Ukraine saw riskier assets worldwide extend their sell-off.

The largest cryptocurrency was trading down 8.8 per cent at $33,058, its lowest since July 23, taking losses from its all-time high of $69,000 hit in November past 50 per cent.

India’s Finance Secretary TV Somanathan warned on Wednesday that cryptocurrencies like Bitcoin, Ethereum or non-fungible tokens (NFT) would 'never become legal tender' in India.

“Crypto assets are assets whose value will be determined between two people. You can buy gold, diamond, crypto, but that will not have the value authorisation by the government,” he said as India announced a plan to issue digital currency based on blockchain.

He said the digital rupee would be backed by the Reserve Bank of India, which will be legal in the country. “Rest all aren’t legal tender, will not, will never become legal tender.”

The IMF official said crypto is now very closely tied to what is happening to equities. “We can’t just dismiss it,” he said.

The IMF’s crypto-related warnings are nothing new. The Fund has called attention to the risks crypto could pose to global financial stability for several years.

Last week, the IMF reiterated its concerns over El Salvador’s Bitcoin adoption and urged the Central American country to drop the asset as legal tender.

— issacjohn@khaleejtimes.com

Issac John

Published: Wed 2 Feb 2022, 5:51 PM

Recommended for you