IMF warns EMDEs’ local currencies face crypto replacement risk

LAMENTING THE CHALLENGES involved with protecting the world financial system, the International Monetary Fund (IMF) has expressed concern that cryptocurrencies would become a major currency in Nigeria and other developing countries.

In a recent report titled, ‘Global Crypto Regulation Should be Comprehensive, Consistent, and Coordinated,’ the IMF said emerging markets and developing economies (EMDEs) are faced with immediate and serious risks of crypto assets substituting local currencies, but promised to safeguard the stability and safeguard the international monetary and financial system.

According to the report,

“Some emerging markets and developing economies face more immediate and acute risks of currency substitution through crypto assets, the socalled cryptoisation.“Capital flow management measures will need to be fine-tuned in the face of cryptoisation. This is because applying established regulatory tools to manage capital flows may be more challenging when value is transmitted through new instruments, new channels, and new service providers that are not regulated entities. Crypto-assets will soon pose systemic financial stability in some countries as policy makers struggle to monitor risks,” it said, while noting that crypto assets were drastically bringing changes to the financial system it was protecting.