By Lalit K Jha :
THE rapid growth of the crypto ecosystem presents new opportunities, the International Monetary Fund (IMF) has said but also cautioned that the digital currency assets pose financial stability challenges. Cryptocurrencies are digital or virtual currencies in which encryption techniques are used to regulate the generation of their units and verify the transfer of funds, operating independently of a central bank. “The rapid growth of the crypto ecosystem presents new opportunities. Technological innovation is ushering in a new era that makes payments and other financial services cheaper, faster, more accessible, and allows them to flow across borders swiftly,” said IMF in a chapter of its latest report Global Financial Stability Report. Crypto asset technologies have the potential as a tool for faster and cheaper cross-border payments. Bank deposits can be transformed to stable coins that allow instant access to a vast array of financial products from digital platforms and allow instant currency conversion, said the IMF in its chapter titled The Crypto Ecosystem and Financial Stability Challenges.
Decentralised finance could become a platform for more innovative, inclusive, and transparent financial services, it added. “Despite potential gains, the rapid growth and increasing adoption of crypto assets also pose financial stability challenges,” the IMF said. In a recent interview to PTI, Tobias Adrian, the Financial Counsellor and Director of the Monetary and Capital Markets Department of IMF said that Bitcoin could lead to instability because it is extremely volatile. It was trading above 65,000 just about earlier this year, and then it came down to below 30,000.