The International Monetary Fund (IMF) warns in its Global Financial Stability Report that the surge in crypto asset transactions in emerging markets could pose risks to the global financial system. He added that the volume of crypto assets traded surged, especially after sanctions were imposed on Russia. The report added that crypto trading could also be used by sanctioned countries such as Russia to circumvent sanctions and monetize energy resources through Bitcoin mining. Therefore, policy makers around the world intervene to ensure market stability and fill regulatory gaps “to ensure integrity and protect consumers in the rapidly evolving world of crypto assets.” The IMF said it needs to be done.
Since the beginning of the pandemic, the share of crypto assets such as tether, the largest stablecoin used to settle spot and derivative transactions against EM currencies, has increased. Recently, the amount of tethers against the Russian ruble and the Ukrainian hryvnia surged at the end of February, the post-war period between Moscow and Kieu.
Following the introduction of sanctions against Russia and the use of capital restrictions in Russia and Ukraine, the volume of crypto assets traded surged. “But the liquidity of the centralized exchange’s ruble-Gribuna trading pair is still limited, and in the case of the ruble, it has declined even more recently, and large-scale migration of value through the crypto asset exchange is non-existent. It’s realistic, “said a report released Monday.
“Most of this increase (in trading crypto assets) is due to speculative investment activities by emerging market residents, but more structural to crypto assets as a means of payment and / or storage of value. Shifts can pose significant challenges to policy makers, “the report said. The crypto ecosystem enables users to circumvent sanctions, avoid due diligence, and increase transaction anonymity through crypto exchanges and crypto asset providers, the report said.
Sanctioned countries like Russia may use cryptocurrency mining to use energy resources
In addition, sanctioned countries can allocate more energy resources to avoid sanctions through the mining industry. The proportion of mining in sanctioned countries and the overall size of mining revenues suggest that the scale of such flows is relatively restrained, but risks to fiscal health remain. For example, the monthly average of all Bitcoin mining revenues last year was about $ 1.4 billion, of which Russian miners could have earned nearly 11% and Iranian miners could have earned 3%.
“By mining energy-intensive blockchains like Bitcoin, countries can cash their energy resources. Some of them cannot be exported due to sanctions. Cashing is directly on the blockchain. It takes place outside the financial system where sanctions are in place, “said the IMF.
According to the IMF, policy makers around the world need to close the gap in regulating crypto assets as the risk of evading sanctions by crypto and crypto ecosystems increases. In particular, US and UK regulators are calling on companies in jurisdictions, including the crypto assets sector, to be more vigilant about possible attempts to circumvent Russia’s sanctions.