Category: IMF

Bitcoin adoption won’t affect IMF talks, says El Salvador’s top central banker

Bitcoin adoption won’t affect IMF talks, says El Salvador’s top central banker

Douglas Rodriguez, president of the Central Reserve Bank of El Salvador, has dismissed fears that the country adopting Bitcoin (BTC) as legal tender will scupper plans for a $1.3-billion loan facility from the International Monetary Fund (IMF).According to Bloomberg on Tuesday, Rodriguez stated that the central bank does not see any risks associated with the Bitcoin Law even as it prepares to secure an extended loan facility from the IMF.Indeed, the central bank described El Salvador’s Bitcoin Law as only having “upside risks,” with Rodriguez stating that a BTC bull run could help the country’s economy expand by over 9% more than initial forecasts.According to Rodriguez, the central bank has explained to the IMF that “Bitcoin is simply a payment method.”As previously reported by Cointelegraph, El Salvador’s government says Bitcoin acceptance continues to grow with people selling more United States dollars to buy BTC.Uncertainty over the fate of the IMF talks, as well as the recent BTC adoption as legal tender, has seemingly had a significant effect on the country’s credit rating.El Salvador’s bonds declined sharply in September following “Bitcoin Day” in the country, putting even more significance on the outcome of the IMF loan deal.Related: El Salvador removes BTC price feed from Chivo app to crack down on arbitrage scalpersAccording to central bank figures, with El Salvador’s external debt rising to $18.45 billion in Q2 2021, securing the IMF loan facility could be crucial to ensuring access to the global market in 2022.IMF officials have criticized El Salvador’s Bitcoin adoption, calling the move “an inadvisable shortcut” that could have dire consequences for the country.Critics of the move from the mainstream finance sector have pointed to volatility and money laundering as among the likely systemic risks posed by accepting BTC as legal tender.

Economics Professor Warns ‘Cryptocurrencies May Contribute to Monetary and Financial Instability’

Economics Professor Warns ‘Cryptocurrencies May Contribute to Monetary and Financial Instability’

Cornell University’s professor of economics and former head of the IMF’s China division, Eswar Prasad, has warned that “Cryptocurrencies may contribute to monetary and financial instability.” He added that the risk is amplified if the industry is unregulated and lacks investor protection.
Economist Sees Crypto Posing Risks to Financial Stability
Eswar Prasad, the Nandlal P. Tolani Senior Professor of Trade Policy and professor of economics at the Charles H. Dyson School of Applied Economics and Management at Cornell University, shared his view on cryptocurrency in an interview with CNBC, published Wednesday.
Prasad is also a senior fellow at the Brookings Institution, where he holds the New Century Chair in International Economics, and a research associate at the National Bureau of Economic Research. He was previously chief of the Financial Studies Division in the research department of the International Monetary Fund (IMF) and head of the IMF’s China division.
He said:
Cryptocurrencies may contribute to monetary and financial instability, especially if they were to spawn a large and unregulated financial system that lacks investor protection.
His statement echoes a report recently published by the IMF cautioning that the rising popularity of cryptocurrency could pose a threat to financial stability. Moreover, the deputy governor of the Bank of England, Jon Cunliffe, said this week that regulation is urgently needed since the crypto industry is growing rapidly, and there are some “very good reasons” to think that it could pose risks to the country’s financial stability in the future, even though the risks are currently limited.
Professor Prasad was also asked how cryptocurrencies could widen economic inequality. “Cryptocurrencies and their underlying technology hold out the promise of democratizing finance by making digital payments and other financial products and services easily accessible to the masses,” he replied. “But because of existing inequalities in digital access and financial literacy, they could end up worsening inequality.”
In addition, he emphasized that “any financial risks arising from investing in cryptocurrencies and related products might end up falling especially heavily on naïve retail investors.”

The Cornell professor of economics also discussed central bank digital currencies (CBDCs), stating:
I think central bank digital currencies are the way of the future. But every central bank will want to make sure that its money is not used for illicit purposes, so transactions will be auditable and traceable.
However, Prasad noted that “if every payment you make, including for a cup of coffee or for a sandwich, can be seen by a government agency, that’s an uncomfortable proposition.” The economist concluded: “You could, in a more dystopian world, have the government deciding what sort of goods and services its money can be used for.”
Do you agree with the economics professor? Let us know in the comments section below.

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IMF Says Banking Sector Under Pressure From Crypto Adoption, Warns Against Meme Tokens: Report

IMF Says Banking Sector Under Pressure From Crypto Adoption, Warns Against Meme Tokens: Report

The International Monetary Fund (IMF) thinks crypto has the potential to put pressure on the banking sector.
In a new report, the IMF says technological innovation is changing financial services. The report notes that the banking sector could lose market share if the crypto ecosystem grows to become a mainstream alternative to bank deposits or current lending options.
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US Inflation Expectations Highest Since 2013, Gas Prices Skyrocket, Supply Chains Buckle

US Inflation Expectations Highest Since 2013, Gas Prices Skyrocket, Supply Chains Buckle

Americans are still concerned about dealing with inflation, as the cost of goods and services has continued to rise significantly in a short period of time. The Federal Reserve has published the latest Survey of Consumer Expectations report and U.S. households believe inflation will be up 5.3% one year from now. In addition to the dreary economic outlook, gas prices across the U.S. have skyrocketed up more than $1 from a year ago.
New York Fed’s Survey of Consumer Expectations Continues to Look Gloomy
After 2020’s massive monetary expansion, in order to help the economy combat the coronavirus outbreak and help facilitate the lockdown orders that subsequently followed, inflation has crept into the wallets of every American.
Month after month, the Federal Reserve has published the central bank’s Survey of Consumer Expectations (SCE) reports, and every month, inflation expectations jump higher. Once again, the latest Fed SCE report published on Tuesday indicates that Americans are still expecting higher inflation and low purchasing power a year from now.
New York Fed chart on three-year inflation expectations via the publication Zerohedge and the article dubbed “Fed Losing Control As Consumers’ Inflation Expectations Hit New All-Time High” written by Tyler Durden.
The inflation expectations have surged to all-time highs and are the highest levels since 2013, with an expectation of 5.3% one year from now. Furthermore, the New York Fed (the branch that publishes the SCE report), once again mentions the coronavirus.
“Median inflation uncertainty – or the uncertainty expressed regarding future inflation outcomes – was unchanged at the short-term horizon and decreased at the medium-term horizon,” the Fed survey highlights. “Both measures are still well above the levels observed before the outbreak of Covid-19.” The recently published Fed SCE report leverages a rotating panel of 1,300 households.
IMF Warns Central Banks Like the Fed to Tighten Monetary Easing Policy
In addition to the SCE report, the International Monetary Fund (IMF) has noted, in the world organizations’ quarterly update on global economic conditions, that central banks may need to tighten monetary easing policy. The IMF emphasized countries like the U.S. and the U.K. where “inflation risks are skewed to the upside.”

IMF warns of need to be ‘very, very vigilant’ over rising inflation risk
We have gone from very transitory to we have to be very, very vigilant.
Got it…
— Gold Telegraph ⚡ (@GoldTelegraph_) October 12, 2021

“While monetary policy can generally look through transitory increases in inflation, central banks should be prepared to act quickly if the risks of rising inflation expectations become more material in this uncharted recovery,” the IMF’s economic counselor and director of research, Gita Gopinath stressed in the report. “Central banks should chart contingent actions, announce clear triggers, and act in line with that communication.”

Supply Chains Buckle, Gas Prices per Gallon $1 Higher Than Last Year
To make matters worse, the U.S. supply chain (and internationally) has been dealing with significant issues and gas prices across the country have risen significantly since last year. The media in the U.S. continues to tell tales of a buckling supply chain and some are blaming supply chain issues on the conflict between the U.S. and China.

Just 8 states have average #gasprices still under $3/gal:OK $2.88MS $2.89TX $2.89AR $2.91LA $2.97KS $2.98AL $2.98MO $2.99
— Patrick De Haan ⛽️📊 (@GasBuddyGuy) October 11, 2021

Supply chain shortages and rising gas prices have fueled the inflation crisis in the U.S., so much so that doesn’t seem to be ‘transitory.’ Every week, headlines show that “the return of empty shelves” has returned in the United States as well as the United Kingdom. Grocery stores in nearly every state across the U.S. are starting to see empty shelves again.
U.S. gas prices have also risen by $1 since last year and the average price of gas in the U.S. today is $3.25 per gallon. Only eight states in the U.S. have gas for under $3 a gallon.
What do you think about the current inflation woes Americans are dealing with in 2021? Let us know what you think about this subject in the comments section below.

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buckling supply chain, Central Bank, China, Consumer Debt, Consumers, credit, economics, empty shelves, Fed Report, Federal Reserve, food inflation, gas inflation, gas prices, Gita Gopinath, government spending, IMF, inflation, inflation crisis, New York Fed, Purchasing Power, SCE, SCE report, supply chains, Survey, Survey of Consumer Expectations, the fed

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IMF reiterates more oversight for crypto in latest report on financial stability

IMF reiterates more oversight for crypto in latest report on financial stability

The International Monetary Fund’s Financial Stability Board said the growing adoption of cryptocurrencies could potentially increase the risks to the global economy.In its Global Financial Stability Report released on Oct. 12, the International Monetary Fund, or IMF, said the adoption of crypto assets and stablecoins in emerging markets and developing economies could pose a challenge to those countries’ macroeconomic and financial stability. The group said the risks were “contained for now,” but urged regulators to monitor cryptocurrencies and keep them in check.The IMF added that as the crypto space expanded and evolved “new sources of risk” were emerging such as stablecoins and decentralized finance, or DeFi. Specifically, the group identified the space at risk from hacking, “lack of transparency around issuance and distribution” of tokens, and operational risks including outages during periods of extreme volatility. It also labeled “meme tokens” and centralization — a major exchange like Binance handling a large amount of trading volume, while Tether is responsible for the majority of the supply of stablecoins — as factors to consider.“So far, losses as a result of such risks have not had a significant impact on financial stability, globally or domestically,” said the IMF. “However, as crypto assets grow, the macro-criticality of such risks is likely to increase.”Related: IMF issues veiled warning against El Salvador’s Bitcoin LawHighlighting the risks of developing countries adopting digital assets is a common tagline for the IMF, with the group having previously reported on the challenges of central bank digital currencies and stablecoins. The group has warned both the Marshall Islands and El Salvador that recognizing a digital currency as legal tender could “raise risks to macroeconomic and financial stability as well as financial integrity.”Earlier this month, the IMF released a set of policies for the emerging markets and developing economies to ensure financial stability amid global crypto adoption, given managing director Kristalina Georgieva’s claim that more than half of all central banks in the world were exploring how to launch digital currencies. Recommendations from the group included lawmakers “implement[ing] global standards for crypto assets and [enhancing] their ability to monitor the crypto ecosystem by addressing data gaps.”

Law Decoded: Putting your Bitcoin where your mouth is, Oct. 4–11

Law Decoded: Putting your Bitcoin where your mouth is, Oct. 4–11

There is nothing surprising about Senator Cynthia Lummis, a Wyoming Republican known to be among the staunchest crypto supporters in the U.S. legislature, revealing a sizable Bitcoin (BTC) purchase that she had made earlier in the summer. It is still oddly satisfying to observe the alignment between a politician’s long-declared stance on an issue and corresponding monetary behavior (Lummis had been hodling BTC since 2013). Such consistency will be a norm in blockchain-based governance systems where individuals’ interests are aligned with those of the entire community and where all information that could be of remote public interest is transparent.Below is the concise version of this newsletter. For the full breakdown of policy developments over the last week, register for the full newsletter below.Debt ceiling staved offLast week finally saw the resolution, if temporary, of the weeks-long saga around the U.S. federal government’s borrowing cap, and there is now certainty that the Treasury Department will be able to meet its financial obligations until early December at least. This time around, the unimaginable prospect of the nation’s default on its debt seemed a bit less unimaginable than usual, as Senate Republicans took a stand to protest what they see as an irresponsible Democratic spending spree.While opinions on the short-term effects of the debt ceiling uncertainty on the crypto market differed, there was a near consensus around the notion that in the long run, the political weaponization of federal debt policy will erode trust in the greenback.Letting the watchdogs outIt has emerged that Coinbase is not the only major crypto industry player that is being harassed by the Securities and Exchange Commission. Circle, the firm behind USD Coin (USDC), has revealed receiving an investigative subpoena from the agency back in July, also stating its willingness to “cooperate fully.”Over in the enforcement realm, a major announcement came from Deputy Attorney General Lisa Monaco, who has recently been prominent in the DOJ’s efforts to combat ransomware and cyberattacks. Speaking at the Aspen Institute Cyber Summit, Monaco said that the Justice Department launched the National Cryptocurrency Enforcement Team in order to boost the government’s capacity to disrupt financial networks facilitating cybercrime.100+ CBDCs are comingKristalina Georgieva, managing director of the International Monetary Fund, spoke favorably of digital currencies last week. Expectedly, she referenced central bank digital currencies, or CBDCs, which sit tight within the regulatory perimeter. More interestingly, Georgieva shared some previously undisclosed numbers on how many countries are at some stage of exploring or developing CBDCs. 

IMF Head Says Central Bank Digital Currencies Are Reliable, Hard to Think of Bitcoin as Money

IMF Head Says Central Bank Digital Currencies Are Reliable, Hard to Think of Bitcoin as Money

Digital currencies backed by central banks are the most reliable form of digital money, according to IMF managing director Kristalina Georgieva. At the same time, to think of cryptocurrencies such as bitcoin as money is difficult, believes the chief executive of the international financial institution.
IMF Chief Georgieva Marks Top Issues for Policymakers Exploring CBDCs
Among the members of the International Monetary Fund (IMF), 110 countries are exploring central bank digital currencies (CBDCs), the fund’s chair and managing director Kristalina Georgieva revealed at an event hosted by Bocconi University in Italy. Speaking remotely to the audience, she noted that the key challenge for monetary authorities now is to guarantee the interoperability of these currencies.

According to Georgieva, a major consideration is whether state-backed digital currencies can serve as a means of exchange trusted by the public, Reuters reported on Tuesday. Other questions policymakers need to answer are if CBDCs can contribute to domestic economic stability and how they would fit within international regulatory frameworks introduced by organizations like the Bank for International Settlements (BIS).

The BIS Innovation Hub is leading several projects to test the use of state-issued digital currencies in international transactions such as a collaboration between the Reserve Bank of Australia, Bank Negara Malaysia, the Monetary Authority of Singapore, and the South African Reserve Bank. These also include joint trials conducted by China, Hong Kong, Thailand, and UAE as well as a wholesale CBDC test carried out by Banque de France and the Swiss National Bank.
In reference to cooperation between international financial organizations and national monetary authorities regarding CBDCs, Kristalina Georgieva further stated:
[It is] very impressive how much the international community, the central banks, institutions like ours are now actively engaged to make sure that in this fast moving world of digitalization, money is a source of confidence and helps the economy function rather than [being] a risk.
The head of the IMF emphasized that she views digital currencies issued by central banks as the most reliable form of digital money while remarking she finds it hard to think of cryptocurrencies as money. “De-facto assets” like bitcoin are not backed by assets that hold their value stable and can rise and fall sharply, Georgieva elaborated, insisting:
In the history of money, it is difficult to think of them as money.
In her address at the Italian academic event, the IMF chief also spoke about Europe’s efforts to deal with challenges caused by the spread of Covid-19. Kristalina Georgieva noted that the Old Continent is now more prepared to avoid another debt crisis such as the one with Greece after the last global financial crisis. However, she stressed that governments need to plan their course carefully as they shift to medium-term fiscal consolidation so they can erase the debt burden related to the pandemic.
Do you think the International Monetary Fund will change its position on cryptocurrencies in the future? Let us know in the comments section below.

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Bitcoin, CBDCs, Chair, COVID-19, Crypto, crypto assets, Cryptocurrencies, Cryptocurrency, debt, debt crisis, Digital Currencies, Digital Money, Europe, Executive, Financial Crisis, Greece, IMF, International Monetary Fund, Kristalina Georgieva, managing director, pandemic

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IMF managing director: 110 countries are 'at some stage' of CBDC development

IMF managing director: 110 countries are 'at some stage' of CBDC development

International Monetary Fund, or IMF, managing director Kristalina Georgieva said more than half of all central banks in the world are exploring how to launch digital currencies.Speaking at a virtual conference hosted by Bocconi University on Oct. 5, Georgieva said the IMF was looking at central bank digital currencies, or CBDCs, and digital currencies as a whole from the perspective of macroeconomic stability. She said the technology had given people the opportunity to effect “seamless, and less costly” transfers, and called CBDCs the most reliable form of digital currency given they had “backing of the state” and were generally regulatory compliant. “We did a survey of our membership, and it was very impressive: 110 countries are at some stage of looking into CBDCs,” said the managing director.Georgieva added that stablecoins “fill the digital gap in privately issued money,” but labeled Bitcoin (BTC) and other cryptocurrencies as assets rather than money. She highlighted price volatility as one of the main concerns for the latter, and said public trust as well as established legal and regulatory frameworks would be necessary for CBDCs to take off.Currently, the Bahamas is the only nation with a state-backed digital currency — the Sand Dollar, which the Central Bank of the Bahamas launched in October 2020. The People’s Bank of China has been piloting its own CBDC in different provinces, and completed cross-border tests in collaboration with the central bank of Hong Kong. However, the largest economy in the world, the United States, is still seemingly ambivalent on the matter.Related: IMF Weighs the Pros and Cons of a Central Bank Digital CurrencyA recent IMF report asked emerging markets and developing economies to “consider the benefits of issuing central bank digital currencies” in an effort to ensure financial stability. The statement follows the fund saying in April it would “step up” monitoring projects in the crypto space including CBDCs, stablecoins, and digital currencies to see how the IMF might be able to “keep pace with policy challenges” around the technology.

IMF recommends CBDC and global crypto standards for financial stability

IMF recommends CBDC and global crypto standards for financial stability

The International Monetary Fund (IMF) released a set of actionable policies for the emerging markets and developing economies to ensure financial stability amid global crypto adoption. The IMF believes in the potential of crypto assets as a tool for faster and cheaper cross-border payments, citing the dramatic increase in the value of the crypto markets despite the bearish trends from May 2021. The report attributes high returns, transaction costs and speed and reduced Anti-Money Laundering (AML) standards as the primary drivers for crypto adoption. To counter the resultant financial stability challenges as a result of increased trading of crypto assets, IMF recommends:“Policymakers should implement global standards for crypto assets and enhance their ability to monitor the crypto ecosystem by addressing data gaps. Emerging markets faced with cryptoization risks should strengthen macroeconomic policies and consider the benefits of issuing central bank digital currencies.”The IMF report shows that the crypto market valuation has expanded beyond Bitcoin (BTC) along with a sharp increase in stablecoin offerings. Three years of IMF data suggests that risk-adjusted returns of non-stablecoin crypto assets such as Bitcoin are comparable to other mainstream benchmarks like S&P 500, as detailed in the figure below:Besides CDBC issuance, the IMF further recommends “proportionate regulation to the risk and in line with those of global stablecoins.” In addition to CBDC implementation, de-dollarization policies will help governments tackle macro-financial risks.Related: IMF intends to ‘ramp up’ digital currency monitoringBack in July 2021, Cointelegraph reported on the IMF’s plan to “step up” its monitoring of digital currencies. Highlighting the benefits of digital assets, an older IMF report read that “payments will become easier, faster, cheaper, and more accessible, and will cross borders swiftly. These improvements could foster efficiency and inclusion, with major benefits for all.”The IMF has also previously planned to meet Salvadoran President Nayib Bukele for discussing the implications and possibilities of mainstream Bitcoin adoption.

IMF Warns Crypto Boom Poses New Financial Stability Challenges, Urges Regulators to Step Up

IMF Warns Crypto Boom Poses New Financial Stability Challenges, Urges Regulators to Step Up

The International Monetary Fund (IMF) warns that the rising popularity of cryptocurrencies poses new challenges to financial stability. “Cryptoization can reduce the ability of central banks to effectively implement monetary policy. It could also create financial stability risks.”
IMF Sees New Challenges to Financial Stability From Crypto
The International Monetary Fund (IMF) warned about the risks posed by the cryptocurrency boom in a blog post published Friday. The post, titled “Crypto boom poses new challenges to financial stability,” is authored by three financial experts from the IMF’s Monetary and Capital Markets Department: Dimitris Drakopoulos, Fabio Natalucci, and Evan Papageorgiou.
Noting that “The total market value of all the crypto assets surpassed $2 trillion as of September 2021 — a 10-fold increase since early 2020,” they said that many entities in the ecosystem “lack strong operational, governance, and risk practices.” These include exchanges, wallets, miners, and stablecoin issuers.
The authors proceeded to discuss “Consumer protection risks,” stating that they “remain substantial given limited or inadequate disclosure and oversight.”
They warned: “Looking ahead, widespread and rapid adoption can pose significant challenges by reinforcing dollarization forces in the economy — or in this case cryptoization — where residents start using crypto assets instead of the local currency.” The IMF experts further described:
Cryptoization can reduce the ability of central banks to effectively implement monetary policy. It could also create financial stability risks.
Moreover, they stated: “Threats to fiscal policy could also intensify, given the potential for crypto assets to facilitate tax evasion. And seigniorage (the profits accruing from the right to issue currency) may also decline. Increased demand for crypto assets could also facilitate capital outflows that impact the foreign exchange market.”

The authors also suggested policy action. “As crypto assets take hold, regulators need to step up,” they wrote.
“As a first step, regulators and supervisors need to be able to monitor rapid developments in the crypto ecosystem and the risks they create by swiftly tackling data gaps,” they detailed. “The global nature of crypto assets means that policymakers should enhance cross-border coordination to minimize the risks of regulatory arbitrage and ensure effective supervision and enforcement.”
The IMF experts suggested: “National regulators should also prioritize the implementation of existing global standards. Globally, policymakers should prioritize making cross-border payments faster, cheaper, more transparent and inclusive through the G20 Cross Border Payments Roadmap.” They concluded:
Time is of the essence, and action needs to be decisive, swift and well-coordinated globally to allow the benefits to flow but, at the same time, also address the vulnerabilities.
What do you think about the IMF’s warning and suggestions? Let us know in the comments section below.

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Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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