The growing interconnectedness between cryptocurrencies and stocks can destabilize financial markets, the International Monetary Fund (IMF) warned in a recent report. The organization believes that increased correlation between stocks and cryptocurrencies raises the possibility of "spillovers of investor sentiment between those asset classes."
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The IMF supposes that the "extraordinary central bank crisis responses" of early 2020 made both crypto prices and US stocks surged amid easy global financial conditions and greater investor risk appetite. The experts call for coordinated global regulatory framework for cryptocurrencies to mitigate the financial stability risks stemming from the crypto ecosystem.
In December 2021, IMF Chief Economist, Gita Gopinath, said the world community should adhere to the policy of regulating cryptocurrencies because if they were to ban them, the authorities would completely lose control over the market. She noted that it is impossible to completely ban cryptocurrencies as their owners can turn to decentralized tools that are not subject to any legal rules and regulations.
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