The International Monetary Fund (IMF) recently issued a stern warning against the rapid growth of the digital assets. The fund argues that the spontaneous rise in the prices of cryptos , is exposing the global financial system to so many attacks; given that the World Bank is also receptive of the crypto asset trend.

This warning was issued as part of IMF release of its World Economic Outlook publication issued on its website. The financial regulatory authority is speculating how to incorporate, bitcoin, ethereum, litecoin, EOS, stellar and Ripple Lab’s XRP token into legalized investment tools. So they can also be used to move money more quickly across borders.

Even with the wide acceptance and cheer of the digital assets by many, IMF is not alone in the criticism of the cryptocurrency. Just last month, the UK government in a categorical statement branded cryptocurrency world  a ‘Wild West.’

This warning from the traditional financial regulator stems from a lot of odds that seem to be against the cryptocurrency world.

Increased Cybersecurity Risk on Financial Infrastructure

According to a report from Forbes, IMF Chief Christine Lagarde said in a speech in February, that the fund is concerned that the cryptocurrency can easily be used in unlawful financial activities. So taking international regulatory action on the cryptos cannot be overlooked. Holding back on this action would lead to higher risks and unnecessary increased exposure to financial risk.

In IMF published the report, sequel to its annual meeting that would be coming up this weekend, in Indonesia Island of Bali, which is its most recent Global Stability Report (GFSR). It is stated that the shifting trend in the cryptocurrency can only pose a huge risk to the global financial system.

The report also highlighted that though there are potential benefits of the cryptocurrency and blockchain -focused companies, the extent of risk involved is yet to unfold.

Another report last month, from McAfee, a cybersecurity firm states that cybercriminals are hatching plans to target devices with cryptocurrency malware. It further stated that a total of $1.5 billion worth of cryptocurrency has been stolen since 2016.

The lead scientist and senior principal engineer with McAfee Advanced Threat Research, Christiaan Beek said that in the past years, internet routers have been a target for crypto mining.

Fluctuation in Prices of Crypto Assets Affects Global Trade Volume.

Though the IMF Chief had appreciated the digital currency in the past, by the GFSR, she expressed concern that the total value of public and private global debt, increased to 60%, now at $182 trillion in the last decade.

Only in 2017, the price of bitcoin skyrocketed from $1,000 in at the beginning to $20,000 in December, now it has come down to $6,500. As the price of bitcoin is falling, so are the prices of all the other cryptos, which have recorded 80% fall.

Rising and falling movement in Cryptocurrency from December, 2017

IMF believes that the cryptocurrency market is still very young and most people are not yet familiar with the market, so the extent of the risk involved would grow as the market grows. It attributed the price fluctuation in the crypto market to a lack of regulation by IMF and other national financial bodies.

In the October World Economic Outlook, the fund report shows that the global economy is projected to rise at 3.7% in 2018 and 2019. This is 0.02 percent less than what was reported in April since China and the US are expected to settle their tariff battle.

From its forecast for global trade volume, the fund expected the total goods and service flow to grow by 4.2% this year and 4% next year. IMF reported that, while some countries did not notice the downward turn in the digital currency market, it is quite notable in some other countries.

The most affected countries in this economic downturn are those that are still testing out cryptocurrencies like Japan, Argentina, Mexico, Brazil, Iran, and Turkey. This happened as a result of the ease with which investors can move their money, using bitcoin and cryptocurrency to avert bank high-interest rates.

The hit of this downturn is more on Turkey and Argentina, whose economy has gone so low to attract questioning about the government ability to manage the economy.

On another side, emerging economies that have more awareness of the digital asset experienced large capital inflow.

IMF Major Concern on Global Economy

The fund fears that the emergence of the crypto asset has made a negative impact on the global trade, causing trade imbalance. Countries like Beijing and Washington have experienced more trade tension.

IMF chief economist Maurice Obstfeld, in his speed, said that it is likely that there will be a further risk of distortion in trade policies due to the ongoing tensions.

The fund also expressed concern that the digital market, which is still very young is not regulated; as a result, funds can easily be shifted across borders without capital control.  So it is of the opinion that the cryptocurrency world should be regulated accordingly, to avoid all the lapses that came along with it.

They went further to enjoin the central banks to exercise control measures that can checkmate activities in the crypto market. Many banks are now contemplating using the Ripple Labs new xRapid Service which can handle cross-border transfers with digital XRP token. It can also work as a bridge between different currencies and it can enable banks or payment providers process trans-border transactions faster.

This warning by IMF is issued to prevent further risk in the global finance arising from unsettled market issues and unbalanced trade which may occur as a result of illicit transaction obtained using cryptocurrency. It is also a step to protect the investors in the digital assets from falling prey to hackers and other predators in the digital asset world.

Cryptocurrency is a booming and lucrative investment tool but the risk involved is very high. Regulation would be the best approach to reduce this risk and protect the players in the market, which are investors.

The post Is the IMF Warning On Cryptocurrencies Responsible for Current Market Decline ? appeared first on ZyCrypto.

Similar to Notcoin - Blum - Airdrops In 2024

origin »

189 +