By Michael Scott
The current crypto market turbulence halting regulators’ efforts to improve global financial stability has created more worry for global leaders. Executives at the International Monetary Fund (IMF) have sent an early warning on the effect of the bearish market on the financial system.
IMF Announcement
A statement issued by IMF officials on January 18 revealed that the collapse of high-profile crypto firms and ongoing liquidity woes might expose the centralized financial system and firms to an inevitable risk.
Notably, the publication was released at the perfect timing when third-world countries are gearing toward crypto adoption. According to data from Global Crypto Adoption, countries from Asia and Sub-Saharan Africa are leading in the ongoing push to implement cryptocurrency.
As per the IMF executive report, the policymakers proclaimed that crypto adoption might have a minimum impact on the current financial systems. But the increase in the number of stablecoins holders in the future might be a threat.
Despite the crypto adoption, the crypto-enthusiast generation exploring the crypto space to generate more gain from digital assets has drastically increased.
Stable Coins Holdings Threats Traditional Financial Systems
The ongoing inflation impulses diminishing the value of local currencies have influenced people to shift to more stable currencies. In the meantime, people have turned to US-pegged stablecoin, USD Coin (USDC), and Tether (USDT), which can withstand inflation spikes.
Beyond this, countries with double-digit inflation have invested more in developing crypto-friendly regulations. Such regulation has encouraged people to storm the crypto world due to the attractive interest rates compared to the local currency.
IMF Predictions
Following the increased crypto adoption, IMF’s executives, led by the head of supervision and regulation Nobuyasu Sugimoto and chief managing director Bo Li announced the future of the traditional financial system is doomed by cryptocurrency dominance.
According to the statement, IMF officials announced that the irresistible moves observed in crypto would require strong regulations to avert financial systems risks. They stated that the traditional financial system would encounter cash outflows, financial instability threats, and regulatory complexities.
Additionally, Sugimoto and Li proclaimed that the impressive stablecoin holdings would undermine the legislators’ efforts to regulate the crypto assets.