Financial transaction

IMF recommends CBDC and Global Crypto Standards for Financial Stability

The International Monetary Fund (IMF) has released a set of policies for emerging markets and developing economies to ensure financial stability amid the global adoption of crypto.

The IMF believes in the potential of crypto assets as a tool for faster and cheaper cross-border payments, citing the dramatic increase in the value of crypto markets despite downward trends in May 2021. The report attributes high yields, transaction costs and speed, and low anti-money laundering (AML) standards as major drivers of crypto adoption.

To counter financial stability issues resulting from increased trading of crypto assets, the IMF recommends that:

“Policymakers should implement global standards for crypto assets and improve their ability to monitor the crypto ecosystem by filling data gaps. Emerging markets facing crypto risks should strengthen macroeconomic policies and consider the benefits of issuing central bank digital currencies. “

The IMF report shows that the valuation of the crypto market has spread beyond Bitcoin (BTC), with a sharp increase in stablecoin offerings. Three years of IMF data suggests that the risk-adjusted returns of unstable crypto assets like Bitcoin are comparable to other traditional benchmarks like the S&P 500, as detailed in the figure below:

In addition to the issuance of digital currency by the central bank (CDBC), the IMF further recommends “regulations commensurate with risk and consistent with those of global stablecoins”. In addition to implementing CBDCs, de-dollarization policies will help governments address macro-financial risks.

Related: IMF intends to “strengthen” digital currency surveillance

In July 2021, Cointelegraph reported on the IMF’s plan to “step up” surveillance of digital currencies. Highlighting the benefits of digital assets, an old IMF report stated that “payments will become easier, faster, cheaper and more accessible, and will cross borders quickly. These improvements could promote efficiency and inclusion, with major benefits for all. “

The IMF is also scheduled to meet with Salvadoran President Nayib Bukele to discuss the implications and possibilities of the adoption of Bitcoin by the general public.

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