The surge in cryptocurrency trading in emerging markets could jeopardize the global financial system, International Monetary Fund warned on Tuesday In a report on global financial stability. Meanwhile, the war in Ukraine has revealed the risks of cryptocurrency payment systems, the IMF found.
“Russia’s invasion of Ukraine and the impact of subsequent sanctions continue to rebound globally, including accelerated cryptography in emerging markets, direct and indirect exposures of banks and non-banks, and cyber-related possibilities. We will test the resilience of the financial system through various channels. Events, “the international agency said in a report.
The IMF has emphasized the increasing use of cryptocurrencies in emerging markets since the start of the pandemic, and that the volume of crypto assets traded on some emerging market currencies has skyrocketed since the West approved Russia. I am paying attention.
Tether — the largest stablecoin used to settle spot and derivative transactions — has seen a surge in trading volume against emerging market currencies. This surge is especially noticeable in Turkey, where exchange rates are highly volatile and the overall use of crypto assets has been the focus of attention in the last few years.
The rise is largely due to speculative investors, but the shift towards using cryptocurrencies as a means of payment can be a challenge for policy makers, the IMF said.
The war in Ukraine also sheds light on the risks of an inherently decentralized crypto payment system. The lack of a centralized payment system makes it difficult to track cryptocurrency illicit activity and enforce sanctions, especially due to the rise in international payments.
The IMF warns that cryptocurrency exchanges that do not comply with sanctions or properly monitor illegal activity may be used to circumvent sanctions. At the same time, they say that the technology used by cryptography enhances the secrecy of transactions and allows them to be more easily concealed.
U.S. Treasury Secretary Janet Yellen said earlier this month that U.S. Treasury Secretary is monitoring whether cryptocurrencies are being used to circumvent sanctions, but the Treasury still sees such activity. Said not.
“We are monitoring attempts to use cryptography to circumvent sanctions and have sufficient enforcement power not to hesitate to use it,” Yellen told the Commission.
Over time, the IMF warns that sanctioned countries like Russia could leverage cryptocurrency mining (the process by which new digital tokens are created) to generate revenue for their financial resources. .. Mining cryptocurrencies such as Bitcoin, which uses large amounts of energy to mint, allows countries to monetize their energy resources directly on the blockchain and outside the sanctioned financial system. The monthly average of all Bitcoin mining revenues last year was about $ 1.4 billion, 11% of which was earned by Russian miners based on an IMF analysis of data from the Cambridge Bitcoin Power Consumption Index.
How to prevent crypto risk
To protect the financial system from risks from cryptocurrencies, the IMF encourages policy makers to develop global standards for crypto assets, and more than fintech companies and decentralized financial platforms to mitigate risk. Keep in mind that strong monitoring is required.
International organizations encourage policy makers to develop coordinated regulations on crypto assets to control capital flows, create international collaborations, address data gaps and leverage technology. doing. According to the IMF, regulatory agencies also need to create a task force for financial activities to implement standards to prevent fraudulent capital flows.
The IMF recommendations come up as the Biden administration is researching ways to regulate cryptocurrencies. As part of the government’s approach, authorities are discussing cryptographic regulations with international counterparts. Members of both the House of Representatives and the Senate have also made proposals to regulate Stablecoin, but none have gained traction yet.
Jennifer Schonberger covers Yahoo Finance’s cryptocurrencies and policies.Follow her in @Geniferism..
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