The International Monetary Fund (IMF) has published a stark warning about the potential impact of stablecoins, warning that they could eventually pose a ‘contagion risk’ to the global financial system.
In a report published by the body, the IMF said stablecoins at the current level do not yet pose a risk to financial stability. However, with growing market caps and the nature of how stablecoins are backed by fiat currency, the report highlighted the potential for wider economic problems later down the line.
The comments were made in the IMF’s 2021 Global Financial Stability Report, which said that the risks “should be closely monitored given the global implications and the inadequate operational and regulatory frameworks in most jurisdictions.”
The report called on a set of “global standards for crypto assets” to ensure consistency and to minimize the contagion risk to other markets.
“The rapid growth of the ecosystem has been accompanied by the entrance of new entities, some of which have poor operational, cyber risk management, and governance frameworks,” it stated.
In particular, the report links to risks of service disruption, hacks and other attacks on exchanges, and low levels of transparency in some markets, which it warned could spread wider into the legacy financial systems on which these stablecoins depend.
While these have yet to have a significant impact on the stablecoin ecosystem to date, the report warned that as stablecoins become larger, the risks of more widespread disruption from the sector will increase.
The report also highlighted the risks from regulation, with stablecoins regulated differently across different jurisdictions, soaring from a $20 billion market cap last year to over $120 billion this year.
The comments from the IMF will be seen as hugely influential, as one of the world’s foremost intergovernmental agencies reporting on economies and the financial system.
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