IMF Warns About the Crypto Market’s Rapid Growth

We’ve seen Bitcoin become popular in 2017 when it was able to reach near $20K. Just like anything that involves an opportunity to get rich quickly, it has attracted individuals looking for overnight profits. But by 2018, things weren’t really as good as last year considering the regulatory changes applied in the industry, the crypto market lost a lot of its charm. However, there are still those who believe that the best is yet to come for this year.

For the International Monetary Fund (IMF), the agency warned that the “rapid growth”  of Bitcoin and other crypto assets could result in “new vulnerabilities in the international financial system”.

Historically, Bitcoin was designed as a result of the 2008 economic crisis. It was designed to have a currency that doesn’t rely on any central bank. And this has become possible using blockchain technology.

Examined by Regulators

It is no secret that Bitcoin and other altcoins including Ripple, Ethereum, and Litecoin to name a few are being examined by regulators in order to find out whether or not these cryptocurrencies can be integrated into different investment tools.

However, there are many concerns regarding cryptocurrencies. For instance, the US Securities and Exchange Commission rejected a number of Bitcoin ETF applications including that of Cameron and Tyler Winklevoss. According to the agency, the reason behind this is the possibility of price manipulation.

Though Bitcoin’s price has slumped back around $6,500 currently, and it seems that the price has been quite stable, there are experts that are anticipating another bull run in the coming months. They believe that a Solid X and VanEck’s version of Bitcoin ETF will be the one that is going to be approved by the agency. If this scenario happens, there is a chance that Bitcoin’s price can go up once again. Many believe that a Bitcoin ETF makes it easier for institutional investors to get involved in the crypto market today.

Is Crypto a Threat?

According to the IMF’s latest World Economic Outlook report, “Cybersecurity breaches and cyberattacks on critical financial infrastructure represent an additional risk because they could undermine cross-border payment systems and disrupt the flow of goods and services. Continued rapid growth of crypto assets could create new vulnerabilities in the international financial system”.

Last month, UK government has branded the crypto market as a “Wild West” considering the lack of regulations in the niche at this time. The UK government suggested that there should be an oversight of the industry and should be handed over to the Financial Services Authority.

This wasn’t the first time that the IMF mentioned cryptocurrencies. In fact, in February, IMF chief Christine Lagarde mentioned that international regulations regarding cryptocurrencies are inevitable. The concern of the IMF is mainly because of the possible use of cryptocurrencies in illicit activities such as that of money laundering. The latest IMF report mentioned that “An indiscriminate rollback of post-crisis regulatory reform and oversight—both domestically and nternationally—could encourage risk-taking, leading to a further buildup of financial vulnerabilities”.

Slowly, cryptocurrencies are being used even by banks. Ripple’s products are reportedly being used by three companies and even by banks.