The International Monetary Fund (IMF) had warned the Group of 20 (G-20) nations the widespread proliferation of crypto assets could lead to banks losing deposits and curtailing lending.
The IMF's report on "Macrofinancial Implications of Crypto Assets" given to the G-20 in February during a meeting in India was made public on Monday, days after the collapse of crypto-friendly banks Signature Bank, Silicon Valley Bank (SVB), and Silvergate Bank. India holds the G-20 presidency this year.
"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 report said.
The report was produced after "very helpful discussions with the Indian Ministry of Finance, as well as international focus group participants" and led to the G-20 deciding on framing global crypto rules through a yet-to-be-framed synthesis paper jointly produced by the IMF and the Financial Stability Board (FSB).
The report also stated that "there are many risks associated with crypto assets, although the significance and relevance of specific risks differ by country circumstances.”
An overwhelming theme of the report is the need for filling data gaps to facilitate policymaking.
The report also stated that despite their "notable risks crypto assets have developed technologies which the public sector can leverage in pursuit of its own policy objectives."
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