IMF on Cryptocurrency's Potential to Create a New Financial System
"Cryptocurrency technology, if not well regulated and supervised, can de facto create a new and alternative financial system," states the IMF in its report, as cited by Yahoo Finance on Wednesday, October 11, 2023.
The recent IMF research covers three important areas:
1. Risk Assessment Matrix
This research introduces the Crypto Risk Assessment Matrix (C-RAM) at the national level to summarize key vulnerabilities, indicators, potential triggers, and relevant policy responses in the crypto sector.
The matrix aims to assist policymakers and experts in identifying and navigating risks associated with cryptocurrencies more effectively. It also helps in creating relevant strategies to mitigate and manage these risks.
2. Fraud and Cybersecurity
Key concerns include structural vulnerabilities within the crypto ecosystem, contagion risks between traditional finance and crypto, operational risks, regulatory arbitrage, limited transparency, and data availability.
The IMF states, "Inherent vulnerabilities in the crypto industry to fraud, cybersecurity threats, and technological risks pose various external threats."
While distributed ledger technology (DLT) can mitigate some observed risks, it also presents regulatory challenges, according to the IMF.
3. What the IMF Sees as Potential Risks to Evaluate
What the IMF considers as potential risks to assess is what cryptocurrency proponents believe will make the financial system more efficient and easily accessible.
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