The International Monetary Fund (IMF) has cautioned that the widespread use of crypto assets could pose a threat to banks, leading to a potential loss of deposits and limited lending.

The IMF’s report on the “Macrofinancial Implications of Crypto Assets,” presented to the Group of 20 (G-20) in February, was recently made public.

The report highlighted the potential risks associated with the proliferation of cryptocurrencies, including its impact on monetary policy, capital flow management, and fiscal sustainability. Additionally, the report stated that central banks’ reserve holdings and the global financial safety net might require modifications to ensure stability.

The IMF report was created after several discussions with the Indian Ministry of Finance and international focus groups, leading to the G-20 deciding to establish a framework for global cryptocurrency regulations.

However, the report acknowledged that the risks associated with crypto assets vary according to each country’s situation. Despite the significant risks associated with crypto assets, the report stated that the public sector can leverage these technologies to achieve its policy objectives.

The report also emphasized the need for filling the data gaps in facilitating policymaking. Furthermore, the report stated that the G-20 must produce a synthesis paper jointly with the Financial Stability Board (FSB) to frame global crypto rules.

While the report doesn’t necessarily imply that banks must refrain from dealing with cryptocurrencies, it highlights the need for appropriate regulations to ensure financial stability.

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