We are now in the final days of 2023, and for the last three months, cryptocurrency investors have started to breathe easier. Although sleepless nights continue, it’s no longer fear but excitement that’s keeping them awake. Bitcoin, accustomed to breaking through tough resistance levels at the opening of Asian markets, has decisively turned its direction upwards. However, what excites investors is scaring the International Monetary Fund (IMF).
IMF Statements on Crypto
We know that financial authorities have not had nice things to say about cryptocurrencies over the years. They’ve used terms like bubble, fraud, scam, trap, and more. However, now the terminology they use to describe cryptocurrencies is changing. They see it as a “risk” to the traditional financial structure. Compared to previous descriptions, this sounds like a compliment.
International Monetary Fund (IMF) President Kristalina Georgieva participated in a crypto-related event in Seoul. During her opening speech, she stated the following:
“The issue is that high adoption of crypto assets could undermine macro-financial stability.”
US officials have expressed this as potentially triggering a banking crisis, but this year we saw that even without widespread adoption of crypto, banks have the ability to collapse on their own. Investors who trusted traditional financial institutions learned that their savings were burned in bank vaults as compensation for long-term bond discounts. Had the Fed not opened the liquidity screen at the last minute, the crisis would have grown even larger.
Crypto and Its Risks for the Current Order
Georgieva mentioned that high adoption of crypto assets could affect the effectiveness of monetary policy transmission, capital flow management measures, and fiscal sustainability due to erratic tax collection.
This concern is fundamentally related to the management of money becoming more democratic. Indeed, US Senator Warren says that if crypto continues to grow like this, the US’s financial sanction power, one of its biggest weapons, could become useless. How will it punish nations that oppose it if it loses this weapon?
Georgieva added:
“Our goal is to create a more efficient, interoperable, and accessible financial system by avoiding crypto risks through providing infrastructure with rules and taking advantage of some technologies. Good rules can encourage and guide innovation.”
