Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Emerging market 'cryptoization' threatens financial stability - IMF

EconomyOct 01, 2021 02:11PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Representations of cryptocurrencies Bitcoin, Ethereum, DogeCoin, Ripple, Litecoin are placed on PC motherboard in this illustration taken, June 29, 2021. REUTERS/Dado Ruvic/Illustration/File Photo

By Tom Wilson

LONDON (Reuters) -The advent of digital currencies in emerging markets could spark "cryptoization" of local economies, potentially undermining exchange and capital controls and upsetting financial stability, the International Monetary Fund said on Friday.

Bitcoin and its kin have in the last year soared in price and popularity, with emerging and developing market economies such as Vietnam, India and Pakistan seeing rapid growth in some measures of adoption, according to https://blog.chainalysis.com/reports/2021-global-crypto-adoption-index U.S. blockchain researcher Chainalysis.

Cryptocurrencies offer, in theory, a cheaper and quicker way of sending money across borders. Backers say digital tokens such as stablecoins could also help protect savings from high inflation or fluctuations in local currencies.

In September, El Salvador became the first country in the world to adopt bitcoin as legal tender, with backers tipping the experiment to lower costs for billions of dollars of remittances sent to the Central American nation.

The IMF said that unsound macroeconomic policies and inefficient payment systems are among the drivers of cryptocurrency adoption in emerging economies, along with the lure of quick gains that has also excited investors across the world.

But the IMF said the exact level of adoption of crypto in emerging economies was hard to gauge accurately.

Factors such as low credibility of central banks and weak domestic banking systems that can fuel "dollarization" can also contribute to growing crypto use, the Fund added.

Dollarization is where a foreign currency - typically the U.S. currency - is used in addition to, or instead of, a domestic currency. High inflation or the instability of a domestic currency are among the drivers of the process.

Wide adoption of stablecoins - digital tokens designed to hold a steady value and seen as useful for savings and commerce - could also pose significant challenges by reinforcing existing dollarization forces, the IMF said.

"Dollarization can impede central banks' effective implementation of monetary policy and lead to financial stability risks through currency mismatches on the balance sheets of banks, firms, and households," it said.

"Cryptoization" could also become a threat to fiscal policy, with digital assets possibly facilitating tax evasion, the IMF added.

The fund urged developing nations to strengthen macroeconomic policies and consider the possible benefits from issuing central bank digital currencies as a response to the rise of crypto.

Emerging market 'cryptoization' threatens financial stability - IMF
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (8)
Eudon Hickey
Eudon Hickey Oct 02, 2021 5:16PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Corrupt IMF create money/sdr’s from nothing, where as crypto has function and limited supply. IMF needs to shut down, as it has done nothing to help people. It only helps themselves and elites
Matt Brackley
Matt Brackley Oct 01, 2021 2:17PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
give me a break nobody actually buys things with crypto...maybe a very small percentage but people still measure their wealth in ounces and dollars.
Viktor Koldamov
Viktor Koldamov Oct 01, 2021 2:17PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
yields are negative, inflation is above 4%, gold has a negative returns for the last 10 years..... Bitcoin 1000% plus
Roger Miller
Roger Miller Oct 01, 2021 9:55AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
They’re admitting cryptocurrency is a threat to their poorly managed fiat currencies, and is harder for politicians to get their greedy hands on it.
Vincenzo Tilotta
Vincenzo Tilotta Oct 01, 2021 9:55AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Exactly, the IMF is strongly against crypto because they want to keep enslaving the EMs they have under their thumb. IMF are terrified of crypto technologies, which will give more monetary power and a higher purchasing power to some the poorest people in EMs.
perplexed76 .
perplexed76 . Oct 01, 2021 9:40AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
more and more money received unlawfully go to crypto coins.
perplexed76 .
perplexed76 . Oct 01, 2021 9:35AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
criminal money ---> crypto coins
Ricardo Diogo
Rcd72 Oct 01, 2021 9:20AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
stop money printing 💰 and the balloon 🎈 will empty
Felipe Daniel
Felipe Daniel Oct 01, 2021 9:18AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Not true, it only threatens the monopoly of IMF to control and extort countries
DJ Ryte
DJ Ryte Oct 01, 2021 9:17AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Not if bigGovs have anything to say. Power over the people in any form will be hard to surrender to freedom.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email