KUALA LUMPUR, Jan 25 — The share of cryptoassets and stablecoins in relation to the money supply is currently small, thus their impact on the monetary and financial system at this point is limited but their adoption and use could increase rapidly, which hastens the need for them to be regulated, said the International Monetary Fund (IMF).
“Cryptoassets are increasingly becoming an attractive investment asset, including for institutional investors, while stablecoins have the potential to become global, if issued by big tech firms with large user bases that span countries,” said its financial counsellor and director, monetary and capital markets department, Tobias Adrian.
There could be significant implications for the international monetary system if wide adoption of cryptoassets and stablecoins does indeed occur, he said in his keynote speech on the second day of MyFintech Week 2022 today.
He said widespread “currency substitution” could potentially undermine government’s control of monetary policy and have an impact on domestic financial conditions.
Additionally, Capital Flow Measures could be more easily circumvented and independent exchange-rate regimes could be harder to maintain.
“Capital-flow volatility could increase, as could gross foreign-asset positions, potentially triggering balance-of-payments problems.
“There is risk of fragmentation of payment systems, and of global ‘digital divide’, stemming from differences in countries’ access to new payment technologies and their capacity to leverage and regulate it,” he said.
Adrian said to ensure that the international monetary system remains stable and efficient, it is important that digital money is regulated, designed, and provided so that countries maintain control over monetary policy, financial conditions, capital-account openness, and foreign-exchange regimes.
Payment systems must become more integrated, not fragmented, and must work for all countries to avoid a digital divide, he added.
“We need clear legal frameworks to determine whether these new forms of money are deposits, securities or commodities. Clear regulations must be enacted so these forms of money fully address risks to financial stability and integrity, consumer protection, and market contestability,” he said. — Bernama
