IMF issues new recommendations to bolster financial stability

The International Monetary Fund (IMF) has released a new set of policies with the aim to reduce the financial risks associated with the crypto boom. Recall that IMF had previously warned that the global crypto adoption poses new challenges to financial stability. Now as a result, IMF is recommending some new policies that will help developing economies and emerging markets to counter financial instability and ease their adoption of crypto.

Without any doubts, the IMF strongly believes in cryptocurrency as an important tool for cheaper and faster cross-country payments, and crypto itself proving over time, to be here to stay. For instance, despite the bearish trends from May 2021 suggesting otherwise, crypto markets values have unexpectedly increased. According to the report, the global adoption of crypto is being driven by factors like its speed of transactions and low costs, very high returns, and recently reduced Anti-Money Laundering (AML) standards.

To avoid the inevitable financial stability challenges that are bound to happen from the crypto boom, IMF has now released a set of recommendations.

Firstly, IMF advises policymakers to implement what it calls the ‘global standards for crypto assets’ and urged them to actively look into improving their capacity to monitor the crypto ecosystem. IMF also pointed out the need and benefits of central banks issuing the central bank digital currencies (CBDC).

In addition to the issuing of CDBCs, the IMF also recommends regulation to risks in a way that is proportionate and also in line with those of global stablecoins. The body also noted the importance of de-dollarization policies as it believes that will help governments to check macro-financial risks.

Recall that the IMF has previously warned that cryptoization could not only create financial stability risks, but could also reduce the ability of central banks to implement monetary policies effectively.  Now however, the organization has given its best recommendations in this regard.