According to an IMF official, sharp price fluctuations in cryptocurrencies are causing “destabilizing” capital flows over emerging markets.
IMF financial advisor and also head of capital markets division, Tobias Adrian, stated that cryptos are used to withdraw money from countries that are seen as unstable by some foreign investors. In an interview with the Financial Times, Adrian stated that this creates a great challenge for politicians in some countries, and underlined that the crypto markets have lost $ 1 trillion since their peak.
Last week, the IMF urged El Salvador to stop legally recognizing Bitcoin, noting that using the digital asset presents “major risk” to its financial stability and integrity.
Adrian said emerging economies face “immediate and acute risks” as a result of replacing existing currencies with cryptoassets, a process called “cryptoisation.”
Adrian believes that the drop in cryptos has also affected stocks:
“The correlation between crypto and stock markets is increasing strongly. Crypto is now very closely linked to stocks. We can’t just ignore it.
Adrian IMF urged national and global regulators to oversee cryptoassets and work on it in a coordinated manner:
“Agreing on global regulations never happens fast. But if we start now, we can enjoy the benefits of fundamental technological innovation while achieving the goal of maintaining financial stability.”
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