On Thursday, the International Monetary Fund released a report titled “Global Crypto Regulation Should Be Comprehensive, Consistent, and Coordinated,” which revealed potential threats from crypto assets to world currencies like the naira.
As the financial system becomes more interconnected, the organization sees a rapid growth of crypto-assets and their associated products and services in recent years. Many activities in this sector, however, are unregulated.
Between July 2020 and June 2021, the organization recorded a total of $105.6 billion in crypto assets traded, representing a 1,200 percent increase in value. Africa leads peer-to-peer (P2P) payment platforms in terms of transaction volume across all regions.
As the number of crypto assets transactions grows, policymakers are finding it difficult to keep track of the risks. The fact that crypto assets transactions are cross-sector and cross-border limits the effectiveness of national strategies. The International Monetary Fund (IMF) warns that such imbalances will exacerbate systemic financial instability in some countries.
“These risks highlight the need for comprehensive international standards that address the risks that crypto-assets, their associated ecosystems, and related transactions pose to the financial system while allowing the development of useful crypto assets and applications,” according to the report.
The report recommends licensing or authorizing crypto-asset service providers that provide critical functions, stating that crypto-assets have the potential to profoundly change international monetary and financial systems.
“In a market where valuations are stretched, the nearly $2.55 trillion market capitalization may reflect froth in addition to the value of underlying technological innovations like blockchain,” the IMF said.