An International Monetary Fund (IMF) division chief and deputy managing director are calling for more action to be taken in the regulatory aspect to avoid crypto’s ups and downs affecting banks and traditional financial institutions. Nobuyasu Sugimoto, deputy division chief of the financial supervision and regulation division of the IMF, and Bo Li, deputy managing director at the IMF, believe that, given the growing links between legacy finance and crypto, cryptocurrency’s volatility might bring systemic risks to the existing markets.
IMF Blog Post Calls for Containing Future Crypto Contagion
The volatility and instability of cryptocurrency markets are starting to worry regulators from all over the world. On Jan. 18, Nobuyasu Sugimoto, deputy division chief of the financial supervision and regulation division of the IMF, and Bo Li, deputy managing director at the IMF, issued an article warning about the effect that the volatility of crypto markets might have on the existing financial system.
The article remarks that the instability developed in crypto markets as a result of the different collapses of tokens and exchanges might affect traditional markets and institutions, given the current deepening of the links between these two systems.
Regulating these markets is one of the elements to prevent this from happening, according to the authors, who also indicate that investors in developed markets have been flocking to some of these assets due to the returns they offer. The IMF Blog post states:
Advanced economies are also susceptible to financial stability risks from crypto, given that institutional investors have increased stablecoin holdings, attracted by higher rates of return in the previously low-interest rate environment.
Risks of Substitution and Cryptoization
While the IMF still does not consider crypto and stablecoins as serious risks to the global financial system, some countries are substituting their currency with crypto and stablecoins, making international control of these funds especially difficult. For Sugimoto and Li, this situation has “the potential to cause capital outflows, a loss of monetary sovereignty, and threats to financial stability, creating new challenges for policymakers.”
This can be seen in economies that are being rammed with high levels of inflation and devaluation at the same time, with citizens losing trust in their fiat currencies and flocking to other alternatives, such as dollar-pegged stablecoins.
To control these risks, the blog post authors recommend setting up global regulations for virtual asset service providers, forcing customer assets to be segregated from the holdings of these companies. Also, stablecoin issuers should be heavily regulated, and are even advised to exert bank-like regulations, depending on the size of the project. Experts have stated before that a run on stablecoins might affect the U.S. Treasuries market.
Also, the global implementation of the Basel Committee directives, a standard on how much cryptocurrency exposure banks can have at any point in time, must be accelerated.
What do you think about the considerations of the IMF Blog post authors regarding cryptocurrency contagion risks? Tell us in the comments section below.
Source: Regulation Archives – Bitcoin News
Breaking News: Yuga Labs Founder Steps Down for Health Reasons
NFT Entrepreneur and Yuga Labs founder Wylie Aronow, creator of Bored Ape Yacht Club and CryptoPunks, Takes Time Off for Health.
NFT Entrepreneur and Yuga Labs founder Wylie Aronow, creator of Bored Ape Yacht Club and CryptoPunks, Takes Time Off for Health after CHF Diagnosis.
Yuga Labs Founder Steps Down
Wylie Aronow, one of the co-founders of Yuga Labs, recently announced that he will be taking a leave of absence from the company due to health reasons. In a tweet, he shared that he had been diagnosed with congestive heart failure. Aronow, who is also known by his pseudonym Gordon Goner, stated that the symptoms started last year and that he had delayed seeking medical attention so he could continue working. However, after undergoing testing, his doctor advised him to make significant changes to his lifestyle.
Aronow announced his departure from his role at Yuga Labs to focus on his health. In a statement, he stated that he would be taking a leave of absence to prioritize his well-being. Although he will no longer have a full-time position at the company, Aronow will continue to serve as a Board Member and Strategic Advisor, though the extent of his involvement in these capacities was not specified.
In a tweet, Aronow explained his departure. He stated that his chronic illness consumed most of his twenties and that he overexerted himself at Yuga Labs, working 12 hours daily. He regrets not finding balance, despite advice from those around him. Aronow’s priority now is to seek medical treatment and focus on healing.
Yuga Labs, with Aronow, gained recognition in early 2021. Aronow and co-founders Greg Solano (Gargamel), Zeshan (Sass), and Kerem (Tomato Ketchup) launched the Bored Ape Yacht Club (BAYC) NFT collection on April 23, 2021. The collection became a massive success. Although the NFTs were initially priced at .08 ETH per ape (around $190), they soon sold for over $100,000 on secondary markets.
Wylie remains a board member and advisor at Yuga Labs. In a Twitter thread, he expressed his confidence in Yuga’s future and the leadership of @cryptogarga. The addition of Daniel Alegre, soon-to-be former President and COO of Activision, further strengthens his positive outlook. Wylie also has a bright future ahead for his brand.