In an article written by Silvia Amaro for CNBC, several key problems flagged by the IMF regarding cryptocurrencies are highlighted. However, the narrative ignores the obvious advantages brought to the fore by cryptocurrencies and their adoption. Are repeated roadblocks the answer? Or is cooperation and a better understanding of the crypto space the way forward?
Data collected by the IMF shows that the value of all crypto assets collectively surpassed $2 trillion in September, a tenfold increase since 2020.
A Lack Of Strong Operational Governance
The IMF has highlighted several issues with the crypto space. One of the chief problems is that the current individuals and financial institutions trading crypto assets lack strong operational governance and risk practices. According to the IMF, a lack of oversight and inadequate disclosure puts crypto traders at significant risk. The IMF also stated that it believed crypto assets were prone to data gaps, opening avenues for money laundering and other illicit activities.
It is clear that cryptocurrencies are still a daily divisive topic, with several arguments for and against them. While supporters of cryptocurrencies argue that they are the future of the financial world, skeptics argue about the risk of fraud and money laundering. However, aren’t these risks present in the current financial system too?
A Social Media Web
The FCA, UK’s financial regulator, has also flagged the growing proximity of social media influencers and crypto investments. Speaking about the problem, Charles Randell, the Chair of the FCA, stated,
“Social media influencers are routinely paid by scammers to help them pump and dump new tokens on the back of pure speculation. Some influencers promote coins that turn out simply not to exist at all. We haven’t seen what will happen over a full financial cycle. We simply don’t know when or how this story will end, but – as with any new speculation – it may not end well.”
A recent example cited by critics is Kim Kardashian, who was paid to promote a token, Ethereummax. Critics also pointed out how little information was shared about the token developers. Cryptocurrencies being highlighted as being associated with a glamorous lifestyle could be detrimental, as any other asset can increase or decrease in value.
Standardization Is Key
According to Myron Jobson, Personal finance campaigner at Interactive Investor, it is essential for policymakers to standardize any advertisements related to cryptocurrencies and clearly explain the risks associated with cryptocurrencies. The problem could lie not with the asset itself but with the messaging, or lack of, educating individuals about the risks when investing in crypto.
Another issue that policymakers are dealing with is that investors, especially young investors, use loans and credit cards to make their first investment in the crypto market.
The Case For Bitcoin And Crypto
El Salvador is one example to look at when trying to understand the potential for the success of Bitcoin and crypto. El Salvador has launched the Chivo Wallet app and has also established several ATMs to ensure smooth daily transactions and remittances.
Meanwhile, the IMF has stuck to its oft-repeated fears around bitcoin and other cryptocurrencies, releasing a statement to emphasize further the risks involved in the legalization of Bitcoin.
IMF Ignoring The Benefits Of Crypto
While the statement acknowledges that cryptocurrencies can make payment systems significantly more efficient., it refuses to recognize or understand the benefits of the industry and refuses to keep an open mind towards the nuances of the industry. Instead, the IMF is focusing on run-of-the-mill and often repeated critiques.
“Given bitcoin’s high price volatility, its use as a legal tender entails significant risks to consumer protection, financial integrity, and financial stability. Its use also gives rise to fiscal contingent liabilities. Because of those risks, bitcoin should not be used as a legal tender. Staff recommends narrowing the scope of the bitcoin law and urges strengthening the regulation and supervision of the new payment ecosystem.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.