The International Monetary Fund has warned about the widespread use of crypto assets in Nigeria and other emerging markets to bypass capital restrictions and sanctions.
According to the IMF’s Global Financial Stability Report, this is the case. The IMF paid increased attention to crypto-assets this quarter.
The IMF had pushed for a worldwide regulatory framework to reduce the risks of financial interconnectivity in January. In its Global Financial Stability Report, the IMF urged for a coordinated strategy to crypto-assets.
What the IMF is saying
The IMF mentioned some structural challenges brought to the fore by the war in Ukraine, leading to de-globalization and fragmentation of the capital market
The IMF highlighted “the risk of fragmentation in payment systems and the creation of central bank digital currency blocs; and more widespread use of crypto assets in emerging markets to bypass capital restrictions and sanctions.”
The IMF then discussed the “risks of cryptoization and sanction evasion through the crypto ecosystem.”
The International Monetary Fund (IMF) has noticed a significant surge in crypto asset trade volumes in various emerging market currencies.
The report said, “A more structural shift toward crypto assets as a means of payment and/or store of value could pose significant challenges to policymakers.”
Following the imposition of sanctions and the implementation of capital controls in Russia and Ukraine, the IMF noted a significant increase in stablecoin trade volumes in Turkey and Russia.
The IMF highlighted that, in terms of sanctions evasion, “the crypto ecosystem could allow users to circumvent such requirements through several means, including (1) the use of exchanges and other crypto asset providers that are non-compliant with sanctions and/or capital flow management measures; (2) poor implementation of adequate due diligence procedures by crypto asset providers; and (3) the use of technologies and platforms that increase the anonymity of transactions.”
In case you missed it
- In August of 2021, in a blogpost titled, ‘Cryptoassets as National Currency? A Step Too Far’, the IMF said it believes that the adoption of cryptocurrencies as national currencies has more risks and cost that outweighs potential benefits.
- Gita Gopinath, the IMF’s senior economist speaking during a lecture for the New Delhi-based economics think-tank, the National Council of Applied Economic Research said that no individual country can solve this problem on their own, given how easy it is to do these transactions cross-border. She said what is needed is a global policy on that front.
- Early this year, in a blog post titled, ‘Crypto Prices Move More in Sync With Stocks, Posing New Risks’, the IMF warned that crypto’s increasing correlation with equity markets will pose new risks to financial stability.