IMF shows some increased curiosity for cryptocurrencies and in a recent document the agency commented all of the use cases and utility of stablecoins as we are about to read in the coming altcoin news below.
The International Monetary Fund issued a paper which is a part of the Fintech Notes series and it outlines the risks and advantages of the digital assets as a new arrival on the fintech scene. The IMF straight away pointed out on the advantages of these assets saying that they have a potential for fast and accessible global payments. The stablecoins are tokenized currencies but there are many ways that they are pegged. One way is to store dollars in a bank making the stablecoins redeemable and the riskier type is the algorithmic stablecoin with its value derived from other cryptocurrencies.
The IMF shows concerns about the risks on the stablecoin markets especially for the smaller economies so if a local currency is shunned in favor of the global stablecoin, this could lead to unwanted dollarization of the economy and losing the national currency sovereignty. There is a competition among some of the other stablecoins but the IMF believes that in the future, a single network could monopolize the entire market. This could also displace banks and ruin their payments networks. In the crypto space, a monopoly is already happening since Tether covers more than 97 percent of all stablecoin deals. The banks also have to compete with stablecoins and have to provide services for some of the projects as well. The other danger is that many types of stablecoins networks could help with terrorism funding and other illicit activities. Despite the fact that the blockchain record can be transparent and accessible globally, the regulators still have a hard time tracking the information.
Currently, some of the stablecoins get issued only after the buyer passes the KYC process. However, this process can also be a subject of fraud or identity theft because they don’t provide the same recourse in case of fraud or loss and the IMF believes that firms have to comply with the capital and liquidity requirements very similarly as banks do. The central banks have explored the various types of pegged digital coins and the People’s Bank of China has already stated that it may issue its digital yuan. India mentioned the potential of the digital rupee so the IMF is skeptical for a reason of the alternative national currencies as we already found out in the latest cryptocurrency news.
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