The snowballing effect of crypto adoption is at full force in 2022 as institutions are rushing to join the party. Considering the serious financial, political and social influence of crypto, it does have the potential to rattle some pretty old foundations. The International Monetary Fund (IMF) is concerned with this massive rush for quick crypto adoption. Truthfully, from a global perspective, there seems to be a lack of regulatory infrastructure to bring everyone in the same page. According to IMF, unregulated crypto has the potential to undermine political power. And of course, destabilizing the global financial system can and will have catastrophic effects.
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Curb Your Crypto Adoption
The International Monetary Fund is calling for domestic policymakers to develop globally-minded regulations of blockchain-related sectors. In a new global financial stability report, IMF called for extensive regulations on the growing blockchain financial sectors such as fintech and decentralized finance (DeFi). Or in simple terms, domestic policymakers should not follow the hype for crypto adoption and rush for unripe crypto adoption.
“Policymakers should develop comprehensive global standards for crypto assets along the activity and risk spectrum. A more robust oversight of fintech firms and decentralized finance (DeFi) platforms is needed to take advantage of their benefits while mitigating their risks.”
Pragmatically, developing international and nuanced standards for crypto on a global level is what IMF suggests. This is primarily to maintain a healthy capital flow and perhaps management effectiveness.
“To preserve the effectiveness of capital flow management measures in an environment of growing usage of crypto assets, policymakers need to pursue a multifaceted policy strategy. Recent measures taken in markets and exchanges in response to elevated volatility in commodity prices highlight the need for regulators to examine the broader implications, including exchange governance mechanisms, resiliency of trading systems, concentration of risk, margin setting, and trading transparency in exchange and over-the-counter markets.”
Political Power
Furthermore, IMF warns how a lack of regulations accompanied by rapid crypto adoption could undercut domestic policy plans for specific countries. In that regard, the IMF urges international cooperation for setting crypto standards.
“In addition, more widespread use of crypto assets in emerging markets could undermine domestic policy objectives. Multilateral cooperation will remain key to overcome these medium-term challenges.”
While this is not something new, the growing concern over a global political shift is now more serious than ever. As for the suggested solution from IMF, welp, all we can say is good luck and Godspeed on your quest to convince “domestic policymakers” to work together and not compete for more money!
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