IMF Warns G20 Crypto Could Impact Banks

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• G20 Outcome: FSB, IMF, and BIS to Provide Global Crypto Framework

The IMF warned the G20 nations that the widespread use of crypto assets could impact banks significantly.

The International Monetary Fund (IMF) warned the Group of 20 (G20) nations that the widespread use of crypto assets could result in banks losings deposits and may impact lending. In a report issued to the G20 in February but only made public on March 13, the IMF says:

A widespread proliferation of crypto assets comes with substantial risks to the effectiveness of monetary policy, exchange rate management, and capital flow management measures, as well as to fiscal sustainability. Moreover, changes may be required to central bank reserve holdings, and the global financial safety net, yielding potential instability. Finally, banks may lose deposits and have to curtail lending.

The “Macrofinancial Implication of Crypto Assets” was made public just days after the collapse of three crypto-friendly banks: Signature Bank, Silicon Valley Bank (SVB) and Silvergate Bank.

In the report, the IMF argues that the benefits of crypto assets currently being touted, such as faster and more cost-effective cross-border payments, more integrated financial markets and increased financial inclusion, have yet to be realized. Further, the IMF says that while the benefits of crypto have yet to be seen, the widespread adoption of crypto assets threatens the effectiveness of monetary policies.

CoinDesk reports that the paper was produced after “very helpful discussions with the Indian Ministry of Finance, as well as international focus group participants” and contributed to the G20’s decision to establish a global crypto framework which has yet to be created.  

G20 Outcome: FSB, IMF, and BIS to Provide Global Crypto Framework

Following meetings of the G20, the Group of the world’s 20 biggest economies, issued a document stating the Financial Stability Board, the IMF, and the Bank for International Settlements would release reports and recommendations for establishing standards for a global crypto regulatory framework.

The FSB will offer guidance on regulating, supervising, and overseeing global stablecoins and crypto asset activities. The FSB and IMF will jointly submit “a synthesis paper integrating the macroeconomic and regulatory perspectives of crypto assets.” The IMF will independently report on the “potential macro-financial implications of the widespread adoption” of central bank digital currencies.

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.