WASHINGTON—The turmoil in the crypto-banking space—which played a primary role in the failure of Signature Bank in New York—may have been predicted at least in part by the International Monetary Fund (IMF).
The International Monetary Fund sent a report titled “Macrofinancial Implications of Crypto Assets” to G20 nations during their meeting in India last month, Investing.com reported.
The report, which was with help from India’s Ministry of Finance and international focus groups, was made public earlier on 13 March, noted Investing.com, adding that it highlighted the heightened attention that crypto assets were receiving from policymakers.
According to the report, “unbacked” cryptocurrencies, such as Bitcoin and stablecoins, may have widespread implications for microfinance stability if widely adopted.
“The report emphasized that in the meantime, the widespread adoption of crypto assets could threaten the effectiveness of monetary policies,” Investing.com said in its analysis.
It also noted that the crypto asset market had grown in complexity and exhibited significant volatility.
‘Substantial Risks’
“A widespread proliferation of crypto assets comes with substantial risks to the effectiveness of the monetary policy, exchange rate management, and capital flow management measures, as well as to fiscal sustainability,” the IMF’s report stated.
According to the IMF, these factors may require changes in central bank reserve holdings, and the global financial safety net, which in turn may lead to potential instability. The report further warned that this may culminate in banks losing their deposits and ceasing their lending operations, Investing.com said.
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