In addition, Adrian —together with Dong He and Aditya Narain from the same department— stresses that in emerging markets and developing economies, the advent of cryptography can accelerate what he has defined as “cryptoization,” which takes place “when these assets replace the national currency and bypass exchange restrictions and account management measures.”
Urgency
The IMF called for “comprehensive international standards” that more fully address the risks that cryptocurrencies can pose to the financial system, as well as its associated ecosystem and related transactions.
With a market cap of $2.5 trillion, the value of the underlying blockchain technology could also “reflect froth in an environment of stretched valuations.”
The IMF’s Financial Stability Board is currently working to develop a global framework to regulate crypto assets and provide an approach to managing risks to financial stability and market conduct.
Adrian said: “Existing laws and regulations may not allow national approaches that comprehensively cover all elements of these assets. Importantly, many encryption service providers operate across borders, making monitoring and enforcement difficult. Uncoordinated regulatory measures can facilitate potentially destabilizing capital flows.”
