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Why cryptocurrencies pose great risk to the economy – IMF

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Bitcoin fails to maintain surge after hitting $50,000 mark

The International Monetary Fund (IMF) has renewed its call against the adoption of Bitcoin and other cryptocurrencies, citing economic risk among others.

In a statement issued on October 1 and seen by Ripples Nigeria on Sunday, IMF admitted that cryptocurrencies improve access to finance but the challenges and risk tied to the unregulated digital asset are higher than the advantages.

The Bretton Woods institution listed quick and easy payments and inclusive access to previously “unbanked” parts of the world as part of the new opportunities in the crypto ecosystem.

It said crypto assets such as Bitcoin, Ethereum, Ripples, Doge, and other stables coins could aid money laundering and terrorism financing, adding that the anonymity it offers create regulatory problems.

IMF said: “The (pseudo) anonymity of crypto assets also creates data gaps for regulators and can open unwanted doors for money laundering as well as terror financing.

“Although authorities may be able to trace illicit transactions, they may not be able to identify the parties to such transactions. Additionally, the crypto ecosystem falls under different regulatory frameworks in different countries, making coordination more challenging.

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“For example, most transactions on crypto exchanges happen through entities that operate primarily in offshore financial centers. This makes supervision and enforcement not only challenging, but nearly impossible without international collaboration.”

While picking out the problems of cryptocurrency usage, IMF said many entities issuing stable coins do not have a dependable operational structure, prone to hackers and causing users to lose their funds invested in the assets.

“Many of these entities lack strong operational, governance, and risk practices. Crypto exchanges, for instance have faced significant disruptions during periods of market turbulence.

“There are also several high-profile cases of hacking-related thefts of customer funds. So far, these incidents have not had a significant impact on financial stability. However, as crypto assets become more mainstream, their importance in terms of potential implications for the wider economy is set to increase,” it added.

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